Adam Smith and modern sociology : a study in the methodology of the social sciences

Digitized by tine Internet Arciiive

in 2007 witii funding from

IVIicrosoft Corporation

littp://www.arcliive.org/details/adamsmitlimodernsOOsmaluoft

ADAM SMITH AND MODERN SOCIOLOGY

ADAM SMITH

AND

MODERN SOCIOLOGY

A Study in the Metl^odology of tl^e
Social Sciences

BY

Albion W. Small
•••

Author of "General Sociology'

Chicago: The University of Chicago Press

London: T, Fisher Unwin, I Adelpl^i Terrace

igo'j

CoPYEiQHT 1907 By
The University of Chicago

PublisLed October 1907

Composed and Printed By

The UniTersity of Chicago Press

Chicago, Illinois, U. S. A.

PREFACE

This book is a fragment which I hope will
some time find its place in a more complete study
of the relations between nineteenth-century
social sciences and sociology.

The larger investigation is in progress in my
seminar, and results are already in sight which
justify belief that the work will not be without
value. '

On the purely methodological side, this investi-
gation was stimulated, if not originally suggested,
by experiences in connection with the St. Louis
Congress of Arts and Science.

In all departments of progressive knowledge,
the second half of the nineteenth century was
unique in its intensive development of scientific
analysis. It is not probable that scholars will ever
permanently appraise the importance of analysis
below their present estimates, but it is certain that
we are entering an era of relatively higher appre-
ciation of synthesis.

The most distinctive trait of present scholar-
ship is its striving for correlation with all other
scholarship. Segregated sciences are becoming
discredited sciences.

VI PREFACE

The sociologists are aware that steriHty must
be the fate of every ceHbate social science. Cross-
fertilization of the social sciences occurs in spite
of the most obstinate programs of non-inter-
course. Commerce of the social sciences with one
another should be deliberate, and it should make
the policy of isolation disreputable.

An objective science of economics without an
objective sociology is as impossible as grammar
without language. The present essay attempts to
enforce this axiom by using Adam Smith as a
concrete illustration.

On the purely human side, unintelligence or
misintelligence about the part that falls respect-
ively to economic and to sociological theory in
the conduct of life is a moral misfortune. How-
ever quixotic it might be to hope that either of
these forms of theory might be popularized to
any great extent in the near future, ambition to
make economists and sociologists understand each
other a little better is not altogether indefensible.

Incidentally this book does what it can to off-
set the harm, more costly to the misled than to the
misrepresented, that ill-report has done to eco-
nomics and economists. The economists who
have been written down as procurers to men's
most sordid lusts have been, as a rule, high-
minded lovers of their kind. The most abused of

PREFACE Vll

them — Smith, Malthus, Ricardo, Mill — devoted
themselves to economics partly because they were
genuine philanthropists. They set themselves the
task of blazing out the path that leads to material
prosperity, and of warning as fully as possible
against side-tracks that would end in a fool's
paradise.

If economic theory has at times tended to take
on the character of a shopkeeper's catechism, and
at other times to become a mere calculus of
hypothetical conditions, the general fact is not
changed, that intelligent conduct of life must
always presuppose an adequate science of
economics.

The economists and the sociologists are study-
ing the real conditions of life from different
angles of approach. They are already learning to
make use of each other's methods and results.
The investigation of which this book is a partial
report is in the interest of a more conscious and
systematic partnership.

The study in which the book is an initial step
starts out with the perception that nineteenth-cen-
tury economic theory was at bottom an attempt
to discover the principles of honorable prudence,/
not to codify a policy of predatory greed. Eco-
nomic theory became socially sterile through
paresis of its conviction that morality is more

viii PREFACE

than prudence. When we shall have learned to
reckon with the accredited results of economic
analysis, in genuine correlation with equally repu-
table results of psychological and sociological
analysis, we shall have advanced a stadium of
intelligence similar to that which was covered in
assimilating the discovery that physical science is
not atheism. If we can begin to interpret the
progress of the social sciences since Adam Smith
as, on the whole, an enlargement and enrichment
of the entire area of moral philosophy, in which
the preserve of economic theory was the most
intensively cultivated field, we shall have done a
service for the next generation. We have been
seeing these things out of their relations. It is
possible to furnish our successors with more
accurate clues.

A comment upon the table of contents will
partially explain the task which the book under-
takes as a portion of a larger task to be reported
upon in later volumes.

Titles III-VII, inclusive, must not be under-
stood as promises of systematic treatment of the
material actually within their scope. On the con-
trary, they are merely formulas for classifying
those materials in the parallel portions of The
Wealth of Nations, in which the problems of
economics and sociology are intertwined. The

PREFACE IX

titles indicate in a general way the large problems
of methodology which the corresponding por-
tions of Smith's treatise implicitly, but not ex-
plicitly, raise. The very fact that the discussion
under those titles, on the basis of Smith's own
analysis, contains hardly more than a hint of the
whole range of problems which the titles now
suggest, serves to carry the argument that eco-
nomic technology, abstracted from the rest of
social science, leaves yawning hiatuses in our
knowledge.

A. W. S.

June io, 1907

TABLE OF CONTENTS

PAGE

I. Introduction i

II. The Sources 25

III. The Economics and Sociology of Labor 79

IV. The Economics and Sociology of Capital 155
V. Economic vs. Sociological Interpretation

OF History 181

VI. The Problems of Economic and of Sociologi-
cal Science 189

VII. The Relation of Economic Technology to
Other Social Technologies, and to

Sociology 209

VIII. Conclusion 235

INTRODUCTION

If one were to come upon The Wealth of
Nations for the first time, with a knowledge of
the general sociological way of looking at society,
but with no knowledge of economic literature,
there would be not the slightest difficulty nor
hesitation about classifying the book as an inquiry
in a special field of sociology.

Under those circumstances there would be no
doubt that the author of the book had a fairly
well-defined view, though not in detail the modern
view, of the general relations of human society,
and of the subordinate place occupied objectively,
if not in conventional theory, by the economic
section of activities to which the book was
devoted.

On its first page the reader would get hints of
the outlook in the mind of the author, and it
would not be hard to construct from those hints
a perspective which would contrast very directly
with certain points in the view that afterward
stole into vogue among classical economists and
working capitalists.

Sombart ^ has made a very strong statement

^ Moderne Kapitalismus, Vol. I, pp. 196, et passim.

2 ADAM SMITH AND MODERN SOCIOLOGY

of the fact that the era of modern capitaHsm
differs from earlier industrial epochs in something
far deeper than mere methods of doing business.
He points out that the dominant motive for doing
business has changed. The controlling purpose
of modern business is to increase the volume
and enlarge the power of capital Capital for
its own sake, and for the social power it confers,
is the standard of modern economic life.

On the other hand, capital has never been to
any great degree an end in itself until the last
three centuries, and particularly since the indus-
trial revolution at the end of the eighteenth cen-
tury. Previous to that time the idea of wealth,
in the minds of rich and poor alike, was that it
was worth having only to spend. Men wanted
wealth because they wanted to consume it, not
because they wanted to capitalise it. In other
words, their whole philosophy of life, whether it
was expressed in their economic actions or in
abstract theory, was to the effect that the life was
more than the things; that people and their needs
were the end-end, while wealth was merely a
means-end.

Whatever the influence of Adam Smith's work
may have been, one cannot study his philosophy
as a whole, even in the fragment of it that has
come down to us, without being: certain that his

INTRODUCTION 3

basic positions were clearly and positively the
human rather than the capitalistic principles. The
author of The Wealth of Nations did not assume
that the service of capital was the goal of eco-
nomic activity. On the contrary, he assumed that
all economic activity was, as a matter of course,
a means of putting people in possession of the
means of life.^

Furthermore, to state the same fact in a little
different way. Smith assumed that the whole value
of economic activities was to be decided by their
effects on consumption. That is, instead of put-
ting the production of wealth in the forefront,
as the most significant measure of economic pro-
cesses, he evidently, at least in his fundamental
theory, regarded the production of wealth as
merely incidental to the consumption of wealth.
His whole moral philosophy — or, as we should
say today, his sociology — was the ultimate
evaluator of all production and consumption;
that is, the human process, as it was analyzed and

'Thus, in the "Introduction" to Book IV of The Wealth
of Nations, he says : "Political Economy, considered as a
branch of the science of a statesman or legislator, proposes
two distinct objects; first, to provide a plentiful revenue or
subsistence for the people, or more properly to enable them to
provide such a revenue or subsistence for themselves ; and
secondly, to supply the state or commonwealth with a revenue
sufficient for the public services. It proposes to enrich both
the people and the sovereign.

4 ADAM SMITH AND MODERN SOCIOLOGY

synthesized by moral philosophy, was judged
to be the tribunal of last resort for verdict upon
the economic process.

This has most certainly not been the per-
spective of nineteenth-century political economy
as a whole, so far as England is concerned. To
speak figuratively, then, the apostolic succession in
social philosophy from Adam Smith is through
the sociologists rather than the economists. The
sociologists have kept alive the vital spark of
Smith's moral philosophy. They have contended
for a view of life in terms of persons rather than
in terms of technology. That is, they have put
persons in the center of their picture of life, and
have assigned a subordinate place to the theory
of those technical activities which deal with the
material products of persons. The economists
are the separatists and heresiarchs, in exagger-
ating the importance of a technology till it has
overbalanced, in social doctrine, the end to which
it is normally tributary.^

If we did not know that Smith's economic phi-
losophy was merely a division of his sociology,
the beginning of his Wealth of Nations would

' Throughout this essay I speak of the classical political
economy as though it were still dominant in England and the
United States. I leave to a later essay the modifications
which are necessary in order to make the generalizations fit
subsequent developments in economic theory.

INTRODUCTION 5

seem to be very abrupt. As a matter of fact,
there is no abruptness, because the preliminaries
which have to be understood as an introduction
to the book have to be suppHed from what we
know of his general philosophy.^ For our pur-
poses it is unnecessary to ask how adequate
Smith's view of human life was, according to the
ideas of present sociology. It is enough that the
moral order was the inclusive concept in his
philosophy, while the economic process was the
included and tributary concept. In so far as eco-

* This initial proposition not only contains nothing new, but
it repeats the invariable conclusion of all who have given at-
tention to Smith's whole system of thought. As Hasbach has
rather caustically hinted (Untersuchungen, p. 20), this pri-
mary fact seems to have been duly observed by everyone but
the economists ! It was pointed out distinctly enough by
Dugald Stewart in 1793, and it has been recognized by nearly
every writer on Smith who does not confine attention merely
to his economic doctrines. For example, Oncken (Smith und
Kant, Leipzig, 1877) remarks (p. 16) : "Es sind Glieder eines
Systemes der praktischen oder Moral-Philosophie in ihrem
Gesammtumfange,und man wird der Arbeit des Urhebers nicht
gerecht, wenn ein died selbstandig herausgehoben wird, um es
unabhangig fiir sich einer weiteren Ausbildung zu unterwerfen.
Ethik, Politik und Oekonomik, so lautet die Trias, welche den

Inhalt der Smith'schen Philosophic bildet Diese

Dreitheilung ist dem schottischen Meister iibrigens nicht
einmal original. Sie hat sich langsam aus dem Entwicke-
lungsgange der praktischen Philosophic seit ihren Anfangen im
Alterthum herausgebildet, und war im vorigen (i8ten) Jahr-
hundert allgemein iiblich." Variations of the same conclusion
might be cited in large numbers.

6 ADAM SMITH AND MODERN SOCIOLOGY

nomic theory has obscured and beclouded this
view, it is an aberration, rather than an orderly
extension of social science. This is always the
case when a theory of means overshadows the
theory of the ends which the means should serve.

The opening paragraph ot Smith's introduc-
tion is strictly consistent with these claims, viz. :

The annual labour of every nation is the fund which
originally supplies it with all the necessaries and conven-
iences of life which it annually consumes, and which con-
sist always either in the immediate produce of that labour,
or in what is purchased with that produce from other
nations.

This passage invokes a picture of a nation con-
suming the products of its annual labor. The
inquiry is, in a word: How may the aggregate
wealth available for consumption be made as
great as possible? There is no reference to accu-
mulation, to increase of capital. That comes later,
in its proper place. The center of interest
is the nation of consuming persons. How may
they have the most of the things which they need
to consume in order to be the most prosperous
persons? We are in danger of being branded as
enemies of our kind, if we bring to light the dis-
tance economic theory and practice have drifted
from this anchorage. Today the main question
is: How may the social machinery for grinding

INTRODUCTION 7

out capital be made most efficient? The clause
is not consciously added, "regardless of its effects
upon men;" but the extent to which this clause
actually vitiates the temper and program of theo-
retical and applied economics really constitutes
the central social problem of our epoch.

This opening paragraph also supports the
belief that frank repetition of some of Smith's
confident presumptions would today place men
well along in the way toward extreme socialism.
No modern trade-union leader, at any rate, is
more sure than Adam Smith was that labor is
the original source of wealth. The difference is
that Smith took it for granted, while the modern
laborer has to fight against jealous denial of this
most rudimentary economic truth. Today capi-
tal is not always content even to share honors
with labor. Capital often goes so far as to claim
superior virtues in the productive process, and
to imply priority of right to the output. This
perversion has not merely crept into economic
practice, but it is written large between the lines
of much economic theory. We shall see that this
is in a considerable degree a change that marks
secession from the moral presumptions upon
which Smith's economic theories were based.

Assuming, then, the homely fact that a nation
is a collection of persons needing consumable

8 ADAM SMITH AND MODERN SOCIOLOGY

goods in order to proceed with the other things
that are of subsequent and superior importance,
and in view of the fact that the produce of the
nation's labor is a dividend that has to be shared
by all the population, Smith in effect asks the
frankly technical question: How may the labor
of the nation he so applied that the dividend will
he as large as possible, and that the quotient for
each sharer may thus amount to a sufficient supply
of the fundamental material necessities?

In this question there is no suggestion nor
implication of the attitude of aloofness toward
the larger questions of social or moral science
which later became characteristic of economic
theory and practice. There is no hint that the
question can be answered independently of the
preliminary analysis of the moral world ; nor that
answering the question about the commissary
department of life solves all the essential prob-
lems of life. On the contrary, the question which
The Wealth of Nations proposes is as frankly
special and technological as though it had been:
How may the sewage of Great Britain, that now
goes to zvaste, he saved and made valuahle in fer-
tilising agricidtural land?

While the two questions are far from co-
ordinate, Adam Smith's philosophy no more
thought of making the question dealt with in The

INTRODUCTION 9

Wealth of Nations the central question of society,
than it would have proposed to put the question
of utilizing sewage in that position. On the con-
trary, the dependence of thought in his system
was implicitly this : Human beings have a moral
or social destiny to work out. Nations are units of
effort in accomplishing that destiny. The people
who compose a nation have the task of find-
ing out appropriate ends of life, of learning what
are the conditions which must be satisfied in
reaching those ends, and of realizing the ends by
getting control of the necessary means. As the
life-problem of individuals and nations presented
itself to Adam Smith's mind, it was, as we shall
later see more in detail, first, a problem of re-
ligion ; second, a problem of ethics ; third, a prob-
lem of civil justice; fourth, a problem of economic
technique.

Without stopping to take issue with this classi-
fication, it is enough for our purpose to insist
upon the main fact that the classification, crude
as it is, and prescribed indeed by the traditions of
the chair of moral philosophy from which Smith
taught it, puts the actual interests of life more
nearly in their essential relations than they were
afterward in economic theory until the sociolo-
gists began to move for a restoration of the bal-
ance. Adam Smith turned from study of social

lo ADAM SMITH AND MODERN SOCIOLOGY

life in its largest relations to intensive study of
one of the techniques by which the processes of
life are sustained. If economic theory remains in
the position of logical subordination which it
occupied in Adam Smith's system, it is an indis-
pensable portion of social philosophy. In so far
as it occupies a different position, unless it can
justify itself as a larger moral philosophy, it does
just so much to confuse and disturb the theory
and practice of life.

We shall see, as we analyze the later econo-
mists from the standpoint of this essay, that two
things are true: first, the so-called classical
economists of England gave an emphasis and a
proportion to economic theory that wrenched it
arbitrarily from the just position which it occu-
pied in Adam Smith's philosophy; second, the
German economists, during the greater part of
the nineteenth century, followed traditions which
in spirit, if not in form and detail, were much
nearer to Adam Smith than to the later classical
English economists. The latter succeeded in
overcasting the whole social sky with their science,
and made it '^dismal," by temporarily obscuring
the more fundamental science in which the eco-
nomic theory of Adam Smith had its setting.

To repeat, the most significant movement in
thought during the present generation is a return

INTRODUCTION li

to a basis of moral philosophy, in perspective
rather than in content like that upon which Adam
Smith rested his economic reasonings. To detect
the serious mistake, and to recover the essential
value of nineteenth-century economics, it is neces-
sary to make as clear as possible the contrast
between the true perspective of economic theory
as a portion of moral science, as it was recog-
nized by Smith, and the fallacious aspect of eco-
nomics, as both corner-stone and key-stone of
moral science, in classical theory, culminating
in John Stuart Mill. It should be added that,
while Mill represents the extreme aberration of
economic theory from its proper center in moral
science, it would not be far from the facts to say
that his chapter on the future of the laboring
classes marks the beginning of the return to
Adam Smith's basis.^

In order to locate more distinctly the point of
departure from which Adam Smith started, it is
well to make a careful note of what is involved
in his own general outline of The Wealth of

^ See J. S. Mill, Political Economy, Book IV, "Influence of
the Progress of Society on Production and Distribution." These
chapters, rather than the single one referred to, may be called
the watershed between the abstract and the sociological tend-
encies in British political economy.

I shall elsewhere discuss the title of Cliffe Leslie to some
of this credit.

12 ADAM SMITH AND MODERN SOCIOLOGY

Nations. It demonstrates beyond a doubt that we
described it in a way that he would have accepted,
if the present meaning of the phrase had been
explained to him, when we called it a purely
technological inquiry which had its methodologi-
cal place as a subordinate division in his whole
social philosophy.

Having observed that the proportion of prod-
ucts to the number of persons among whom
they must be divided tells the story of better or
worse supply of necessaries and conveniences,^
Smith adds that in general this proportion must
be regulated in every nation by two different cir-
cumstances :

First, by the skill, dexterity, and judgment
with which its labor is applied ;

Second, by the proportion between the num-
ber of those who are employed in useful labor
and those who are not so employed.

This word "useful," or its synonym "produc-
tive," is very innocent in the early stages of
economic argument. Smith probably had little
premonition of the Pandora's box of theoretic
evils that it contained."^ We need not hesitate to
"P. I.

'' a. J. S. Mill, Political Economy, Book I, Chap. II, and
especially Chap. Ill, Sec. i, on distinction between "produc-
tive" and "non-productive" labor. Also Mill's essay on the
same subject.

INTRODUCTION 13

accept it here just as he meant it. In a word, it
is a very simple proposition that, other things
being equal, that nation will have the most prod-
ucts to consume which contains the largest pro-
portion of people who make themselves "useful"
in producing consumable products. He did not
mean to imply that this was the only way of
being "useful" in a larger sense.

Smith further observes in this connection that
the abundance or scantiness of material goods
seems to depend more on the former condition
than on the latter, and his reason for thinking
so is contained in the contrast between the savage
tribe, in which each individual is compelled by the
rigors of life to employ himself directly or indi-
rectly in food-getting, yet poverty is universal,
and the civilized nation, in which many live in
comparative idleness, while wealth is relatively
abundant.

The first hook of The Wealth of Nations is
devoted to analysis of the above fact; viz., to
search for the causes of this improvement in the
productive powers of labor, "and the order, ac-
cording to which its produce is naturally \^sic'\
distributed among the different ranks and con-
ditions of men in the society."

With something of Casca's jealousy, we might
stop to inquire: What should be in this "natur-

14 ADAM SMITH AND MODERN SOCIOLOGY

ally"? It is a word which, of course, takes us
back to the Physiocrats, and it presently lends
itself to all the illusions of liberty in the classical
conceptions of free competition; but that will
also come later. Whether Smith was right or not
in his assumptions of the particular natural pro-
cesses underneath the visible social processes, he
was attempting in this first book to carry out an
inquiry that was as purely technological, as dis-
tinguished from moral, as an inquiry by bacteri-
ologists into the differences, and the reasons for
the differences, between the water of a mountain-
stream and that of a millpond.

Economic theory later became involved in
moral assumptions, analogous with questions
about the title to property in the stream or the
millpond. We shall see, not only that those
assumptions begged fundamental questions in
sociology, but that theoretical and practical econo-
mists of the classical school even tabooed the dis-
cussion of those assumptions. The prohibition
was almost as rigid as the exclusion of the sub-
ject of slavery from debate in Congress for the
last decade before the Civil War. Thus the classi-
cal economics, in defiance of all logic, forgot its
strictly technological character, and assumed the
function of an arbiter of morals. This central
fact in British economic history makes it neces-

INTRODUCTION 15

sary for everyone who is concerned with current
moral questions to be thoroughly familiar with the
disturbing influences which the classical economics
exerted upon investigation of moral questions.

At this point I merely repeat that economic
theory, as represented by Adam Smith, was
strictly amenable to the logical demands of moral
theory in the large. Our present task is to make
this initial fact perfectly plain by analyzing the
technological character of Smith's work. With
this analysis as a background it will be possible
to make clear the unconscious slipping of classi-
cal economic theory from the necessary moral
moorings.

In the second book Smith treats "of the nature
of capital stock, of the manner in which it is
gradually accumulated, and of the different quan-
tities of labor which it puts into motion, accord-
ing to the different ways in which it is employed."^

The reasons for considering this subject are,
in Smith's own words, that ''the number of useful
and productive laborers is everywhere in propor-
tion to the quantity of capital stock which is
employed in setting them to work, and to the
particular way in which it is so employed." ^

Again, this inquiry, in the form proposed by
Smith, is as strictly technological as the question

«Pp. 2, 3. 'P. 2.

i6 ADAM SMITH AND MODERN SOCIOLOGY

whether a lock canal will in the end furnish the
best and cheapest transportation through the Isth-
mus of Panama. No one would today be unable
to see that the latter question belongs in a class
entirely apart, and with an entirely different rank
in the moral scale, from the question whether the
United States government had dealt justly with
the former sovereigns of Panama, or the ques-
tions that will arise later about justice in the rules
to be made for use of the canal by foreign
nations. We should never think of confusing
these engineering questions, or of supposing that
the men who plan the construction of the canal
are the authorities who should be allowed to dic-
tate the international law code which should gov-
ern the use of the canal. Yet something very like
these impossible alternatives has been the implicit
claim of classical economics. So far as the soci-
ologists are related to the economists at all, it is
not in questioning their competence to take care
of their own problems, any more than the inter-
national lawyers would claim competence to solve
the proper problems of the engineers. The con-
tention of the sociologists with reference to the
economists is that the function of the latter is
more nearly analogous with that of the engineer
than with that of the legislator, while the sociolo-
gist has a brief for the other interests, over and

INTRODUCTION 17

above the technological, which the legislator is
bound to consider.

We may call attention, in passing, to the squint
toward the Malthusian problem, and the "wage-
fund theory," which our knowledge of later de-
velopments enables us to detect in the formulation
of the last chapter of Book II.

Book III at tempts to explain historically the
different plans which nations have adopted in
applying labor power, and the reasons why the
different policies have had different degrees of
success in securing a relatively large output, and
particularly the reasons why European policy
since the fall of the Roman Empire has inclined in
favor of the urban rather than the rural types of
industry. This again is a strictly analytical in-
quiry. It is logically analogous with an investi-
gation of the policy of the United States since
the adoption of the Constitution with reference to
public lands ; or a comparison of our public policy
toward rivers and harbors, with our treatment
of railways, and the actual effects of the same.
All this, in either case, would furnish important
data for problems of morals. In so far as effects
upon persons, rather than upon things, could be
traced in either case, the respective policies would
come into the moral realm.

The friction between economic and moral

1 8 ADAM SMITH AND MODERN SOCIOLOGY

theory has always been generated in part by the
assumption that the poHcy which was judged to
be profitable economically must for that reason
alone be accepted as justified morally. Whenever
this assumption has had effect in any degree, the
tendency has been to obscure the boundary lines
between economics as a technology, and moral
philosophy, or sociology, as discoverer of a stand-
ard of life to which economic technology must be
conformed.

In Book IV Smith attempts to explain the
different economic theories which have been con-
sciously or unconsciously behind the different
policies discussed in Book III.

This purely historical inquiry, of a different
sort from that pursued in Book III, may be com-
pared with a history of political, or philosophic,
or religious creeds. The facts in either case all
have a certain ultimate value in showing what the
political, or philosophic, or religious creed of
living men should be. Primarily, however, they
are mere exhibits of the actual workings of men's
minds in the past. They show the conceptions
by which they were influenced. They have no
moral value for us whatsoever, except as we
have some moral criterion by which to judge
whether, or in what sense and degree, either of
these previous creeds correctly interpreted the
essential meanings of life.

INTRODUCTION 19

In other words, there is no more moral quality
or force in a mere exhibit of what men in the past
have believed about economics, than there is in
their beliefs about ornaments, or weather signs,
or geography. The history either of economic
processes or of economic theories furnishes some
of the material for a theory of morals. It does
this because both economic theories and economic
processes perforce deal more or less with persons,
as well as with wealth. In so far as economic
theories or processes have to do with persons, they
are to that extent positive or negative judgments
of those values which are lodged in persons; in
other words, of moral values. So long as we are
considering such past judgments merely as facts,
accounting for economic action, the inquiry is as
strictly technological as a chemical inquiry into
the effects of alcohol, for instance, upon various
physiological conditions. It is a question beyond
the competence of physiologist or chemist, as
such, what on the whole should be the policy of
nations or of individuals with reference to the
manufacture and use of alcohol. So far as Adam
Smith planned his inquiry into the history of eco-
nomic theory, he was apparently free from the
confusion which sprang up later about the bear-
ings of the inquiry.

In the fifth and last hook of The Wealth of
Nations Smith treats of the revenues of the state,

20 ADAM SMITH AND MODERN SOCIOLOGY

as distinguished from the wealth created by the
labor of the people of the nation and held by them
as individuals. This again is a subject which,
on the one hand, is purely a matter of fact as to
the operation of a certain part of civic machinery.
On the other hand, it borders first on another
department of technology, viz., civic adminis-
tration, and, second, on a whole realm of moral
questions. The thought of the nineteenth cen-
tury has been kept seething by varieties of
opinions about the bearing which purely techni-
cal and material aspects of the situation should
have upon decisions of major and minor moral
questions as to the functions of government, and
the choice between this and that scheme of
administration, in discharging the functions.

In his announcement of this fifth book Smith
shows very plainly his moral sympathies. For
the first time he distinctly proposes to discuss the
"ought" of the case. He thereby has recourse to
his larger moral philosophy. Our present dis-
cussion is in no sense a challenge of the propriety
of this last phase of Smith's argument. On the
contrary, in his main scheme of method he is to
be held up as a model of the scientific order of
procedure in arriving at judgments of morals.
He is at the same time a striking contrast with
some of his successors. He first derived his con-

INTRODUCTION 21

ception of life in the large. Then he analyzed
one of the great divisions of activity within the
whole scheme of life. On this basis he attempted
to decide what human programs should be adopted
with reference to the wealth element among
human interests. This order and spirit of proced-
ure, enlarged and specialized, is the methodology
for which the modern sociologists are contending.
The economic theory and practice of the
nineteenth century in England, at least until the
younger Mill's time, tended farther and farther
away from Smith's standard. The history of this
apostasy is one of the most instructive approaches
to a sane and convincing sociology.

Before we set out upon the work of justify-
ing this proposition, it may be well to indicate
more precisely the point of view from which we
are to judge economic theory.

In a word, sociological analysis, so far as it
has gone at present, has reduced human life on its
psychical side to evolution of types of interests,
evolution of types of individuals, and evolution
of types of association between individuals. With-
out injecting any .a-priori interpretation whatso-
ever into these phenomena, we find that they
are the elements in which psychology and soci-
ology and ethics find their ultimate problems.
Moral philosophy, whether it is the conscious and

22 ADAM SMITH AND MODERN SOCIOLOGY

deliberate system in the academic mind, or the
instinctive presumptions back of the catch-as-
catch-can practice of the man on the street, is a
reckoning with these primary facts in the human
lot. Considered as activity alone, without intro-
ducing valuations of any sort, human life is at
last the evolution of types of interest, and types
of individuals, and types of interrelation between
individuals. Each term in this analysis is an
indefinitely inconstant variant of each of the other
terms. That is, interests and individuals and
associations are reciprocating terms in a widening
and ascending series of causes and effects. The
evolution of interests and individuals and associa-
tions is thus a more or less coherent process ; and
it is unsafe to assume that we have found the
meaning of any greater or lesser part of the pro-
cess until we have made out the whole story of
its connections with all the rest of the process.
Every moral philosophy is presumptively a science
of this whole process of moral evolution. Soci-
ology, in its largest scope, and on its methodo-
logical side, is merely a moral philosophy
conscious of its task, and systematically pursuing
knowledge of cause and effect within this process
of moral evolution.

The inevitable a priori with which every
attempt at knowledge must begin is, in this case,

INTRODUCTION 23

a judgment of the question: On the whole, is it
better to have faith in this process of moral evo-
lution and to enlist in it for all we are worth, or
to distrust it and desert it or resist it? Assum-
ing that our moral philosophy or sociology has
chosen the former alternative, then our task of
interpretation is to explain every human motion
or collection of motions by all that we can find
out of its functional meaning within the whole
cosmos of movements which make up the process
of moral evolution. Valuations enter into this
supreme attempt to understand, as into all the
lesser attempts to understand, from the begin-
nings of infant reflection. The form of the valua-
tion always is : What is the worth of the part of
the process in question, as related to all the rest
of the process which can be brought into calcula-
tion?

Applying these generalities to the case in hand,
the question which the sociologist is always im-
plicitly asking of the economist is: To what
extent are you making your analyses and passing
your valuations of economic activities as though
they were bounded by the wealth interest alone,
and to what extent do your analyses and valua-
tions take account of the whole process of moral
evolution within which the wealth interest is an
incident? Economic theory, in England and

24 ADAM SMITH AND MODERN SOCIOLOGY

America, throughout the nineteenth century, made
the wealth interest unduly prominent in the pro-
cess of moral evolution, and thereby introduced
confusion into the whole scale of moral valuation.
The present essay makes a beginning of showing
this in detail. The principal methodological thesis
which the exhibit is to support is that a sufficient
interpretation of life to be a reliable basis for
social programs must express economic relations
at last in terms of the whole moral process. This
is true of political economy in so far as it purports
to be more than a technology of things. To the
degree in which political economy proposes to
establish norms for evaluating the activities of
persons, it must answer to the whole moral pro-
cess in which all the activities of persons derive
their meaning.

II

THE SOURCES

Having thus sketched the argument of this
book, I proceed to develop it somewhat in detail.
As a further preliminary, I take the precaution
to state specifically that I am not trying to do over
again either of various things that have already
been done by students of Adam Smith. This dis-
claimer may be expanded in the form of a brief
account of the sources of our knowledge of Adam
Smith.

I. This book is not a biography of Adam
Smith.

Until 1895 the chief source of information,
accessible to the general reader, about Adam
Smith, outside of his published works, was the
brief and rather d ilettantish account written by
Dugald Stewart. This paper was read by
Stewart before the Royal Society of Edinburgh
on two evenings of 1793. It was published under
the title, Account of the Life and Writings of
Adam Smith, with additional notes, in 18 10. It
is now to be found in Hamilton's edition of the
Complete Works of Dugald Stewart, Vol. X;
also in the same volume of the "Bohn Library"

25

26 ADAM SMITH AND MODERN SOCIOLOGY

which contains Smith's Theory of Moral Senti-
ments.

In 1895 M^- Jol^i^ R^^ pubHshed a biography
which appeared to have exhausted the visible sup-
ply of information about Adam Smith the man.^

If the additions of fact were not extensive,
there were certainly corrections of interpretation,
partly by the help of Cannan's **find" ^ in the
briefer biography by Hirst which appeared nine
years, later. ^ If we may characterize the attitude
of Hirst, it is that of a confessed admirer of
Smith, with a desire to represent him sympatheti-
cally and fairly, not merely as the author of two
or three books, nor as a philosopher, but as a man
among men. The two closing pages draw a vivid
and rather effective pen-picture. The argument
of the book is compressed into the final
paragraph :

Of his contemporaries, the nearest perhaps in spirit are
Turgot and the younger Burke, the Burke of the Ameri-
can Revolution, and of Free Trade and of Economical
Reform. But Burke and even Turgot were in a certain
sense men of the past. Though their radiance can never
fade, their influence wanes. But Smith has issued from
the seclusion of a professorship of morals, from the

^John Rae, Life of Adam Smith (London, 449 pages).
"^ Cf. below, p. 59.

^Francis W. Hirst, Adam Smith (London, 1904; 240
pages).

THE SOURCES 27

drudgery of a commissionership of customs, to sit in the
council-chamber of princes. His word has rung through
the study to the platform. It has been proclaimed by the
agitator, conned by the statesman, and printed in a
thousand statutes.

The purpose of the present inquiry makes no
demand for biographical evidence beyond that
which these sources contain.

2. This book is not an attempt to locate

THE PRECISE PLACE OF AdAM SmITH IN THE
DEVELOPMENT OF THOUGHT IN GENERAL.

That task has been undertaken and per-
formed, with a large measure of success, by
Hasbach.'*

In an introduction of fourteen pages, Has-
bach analyzes Adam Smith's fundamental philo-
sophical conceptions, and in the body of his
work he traces the lines of relationship between
the different divisions of Smith's philosophy and
his predecessors.

In general philosophy, he assigns Smith to
the school of Shaftesbury and Hartley, and in-
terprets him also in connection with Butler,
Hutcheson, and Hume.

* Untersuchungen iiber Adam Smith, und die Entwicklung
der politischen Oekonomie, von Dr. Wilhelm Hasbach, ausser-
ordentlichen Professor an der Universitat Konigsberg
(Leipzig, 1891 ; 440 pages). Cf. above, p. 5.

28 ADAM SMITH AND MODERN SOCIOLOGY

In political economy, Hasbach draws lines of
relationship chiefly between Smith and the suc-
cession of writers — Hugo Grotius, Pufendorf,
Christian Wolff, Hutcheson, and the Physio-
crats.

In the science of finance, Hasbach finds it
more difficult to trace Smith's direct antecedents.
He finds himself embarrassed by the lack of an
adequate history of the science of finance, and
refers to the bibliographical suggestions in the
treatment of the subject by Cossa, Roscher,
Stein, Umpfenbach, and Wagner.^ He declines
to attempt a sketch of the history of finance, but
discusses instead these questions : first. How
shall we estimate what Smith did in the science
of finance as compared with Justi, who preceded
him in Germany, but with whose work Smith
was probably not acquainted? and, second. How
shall we compare Smith's work with that of
those predecessors from whose writings he pro-
duced a new science?

In general methodology, Hasbach relates
Adam Smith to three previous tendencies, viz. :
(i) the exponents of deduction — Descartes,
Thomas Hobbes, and the Physiocrats; (2) the
exponents of induction — Bacon, Hutcheson,
Hume, and Montesquieu; (3) the combination

^ Loc. cit., p. 241.

THE SOURCES 29

of deduction and induction in the system
of James Stewart. Thereupon follows a
brief examination of Smith's own methodology.
Hasbach's book is an extremely helpful propae-
deutic for the study of Smith, but our inquiry
takes a quite different direction.^

3. This essay is not an attempt to draw a

MINUTE COMPARISON BETWEEN SmITH's
THOUGHT AND ANY OTHER SELECTED SYSTEM
OF PHILOSOPHY.

This has been done in one notable case by
Oncken.'^

Of Oncken's monograph it must be said that
it is of inferior importance to our inquiry, not
merely because our search takes a different direc-
tion, but because no investigation of the type
represented by Oncken's essay can be of first-
rate value. It is a comparison between two sys-
tems of thought, both of which have performed
their chief service in the world by furnishing the

' Bonar, Philosophy and Political Economy, Chap. VIII,
makes a similar attempt to place Smith in the philosophic
series.

''Adam Smith und Immanuel Kant; der Einklang und das
Wechselverhdltniss ihrer Lehren iiber Sitte, Staat und Wirth-
schaft. Dargelegt von Dr. August Oncken, Docent der Staats-
wirthschaft an der K. K. Hochschule fiir Bodenculture zu
Wien. Erste Abtheilung, "Ethik und Politik" (Leipzig, 1877;
276 pages). Cf. above, p. 5.

30 ADAM SMITH AND MODERN SOCIOLOGY

stimulus for maturer thought. Oncken's per-
formance is not wholly unlike a solemn compari-
son of the architecture of two castles in the air.
What matters it how we decide? While we are
reaching our conclusions the castles have vanished
and their architecture has no meaning. De-
tached systems of thought, set over against each
other solely as rival exhibits of the handiwork of
the mind, are merely archaeological specimens
almost as soon as they are turned out of their
authors' brains. How one system compares with
another in mere static self-consistency is a prob-
lem only a trifle higher in the scale of impor-
tance than the question how different types of
pottery compare with each other. Smith or Kant
or any other philosopher is of general interest
only as a factor in the whole system of factors
that work together in the human advance from
ignorance to knowledge.

Oncken reaches a conclusion to which the evi-
dence will hardly carry less sanguine readers. He
expects to be taken seriously when he sums up his
estimate of both Kant and Smith in a description
which would exactly fit the "Socialists of the
Chair," of the date at which he wrote ! ^ Without

* His resume of the argument is in these words : Der
Staat Smith's ist der namliche wie der Staat Kant's. Beide
Lehren, im Einzelnen luckenhaft, bilden doch in ihren Zu-

THE SOURCES 31

extending the generalization to Kant, we have
already noticed, and we shall have occasion to
observe still further, that Smith uttered opinions
which, abstracted from the circumstances,
might easily be interpreted as onsets of social-
ism. It is even conceivable that his views might
have developed with the progress of events, so
that, if he had lived until the third quarter of the
nineteenth century, his political opinions might
have been more like Adolph Wagner's than Her-
bert Spencer's. When Oncken goes beyond that
and represents Smith as holding a definitely
thought-out program of the state, radically con-

sammenhalte einen einzigen vollstandigen Gedankenbau, der
nicht bios der edelste Ausdruck ihres Zeitalters ist, sondern
der in der Hauptsache diese Zeit sogar weit iiberragt. Ent-
gegen der damals tonangebenden individualistischen Auf-
klarungsphilosophie, welche jede Autoritat und jede zwangs-
massige Verpflichtung an das Gemeinwesen abwies, ist der
Staat Smith's wie derjenige Kant's der moderne Staat der
allgemeinen Wehrpflicht und des Schulzwanges, ja er be-
schrankt sich namentlich bei Smith nicht auf die Erhaltung
des starren Rechtszustandes, sondern auch die positive Wohl-
fahrts- und Wirthschaftspflege sowie die Interessen der Volks-
veredlung werden in seine Aufgabe hereingezogen. Mit einem
Worte, es ist der lebendige, geistesmachtige Culturstaat, zu
welchem das wirthschaftliche Denken unserer Tage wie aus
der Verbannung in die Heimath zuriickkehrt, nachdem ihm die
staatlose Begriffswelt der Manchesterschule und des gesamm-
ten politischen Radikalismus unertraglich geworden ist."
{Loc. cit., p. 276.)

32 ADAM SMITH AND MODERN SOCIOLOGY

trasted with that of the Manchester School, the
sobriety of his judgment ceases to be impressive.

4. This book is not an attempt to justify

THE CONTENT OF AdAM SmITH's MORAL
PHILOSOPHY.

The essential matter is not what he thought
about the particular nature of moral relations,
but that he conceived of human society as sub-
ject to moral law of some sort, and of this moral
law as more authoritative over the members of
society collectively and severally than the pre-
cepts of prudence. It is necessary to exhibit at
some length the evidence on which this
proposition rests.

The chief witness on the subject of Adam
Smith's general moral system is Mr. Millar, once
a pupil of Smith, later professor of law in the
University of Glasgow, and an intimate friend
of Smith until his death. I quote Millar as re-
ported by Dugald Stewart.^

About a year after his appointment to the Pro-
fessorship of Logic, Mr. Smith was elected to the Chair
of Moral Philosophy. His course of lectures on this
subject was divided into four parts. The first contained
Natural Theology; in which he considered the proof of.
the being and attributes of God, and of those principles
of the human mind upon which religion is founded.

^Account, etc. (Bohn ed.), p. xvii.

THE SOURCES 33

The second comprehended Ethics, strictly so called, and
consisted chiefly of the doctrines which he afterwards
published in his Theory of Moral Sentiments. In the
third part, he treated at more length that branch of -moral-
ity which related to justice, and which being susceptible
of precise and accurate rules, is for that reason capable
of a full and particular explanation.

Upon this subject he followed the plan that seems to
be suggested by Montesquieu; endeavoring to trace the
gradual progress of jurisprudence, both public and pri-
vate, from the rudest to the most refined ages, and to
point out the effects of those arts which contribute to
subsistence, and to the accumulation of property, in pro-
ducing correspondent improvements or alterations in law
and government. This important branch of his labors he
also intended to give to the public; but this intention,
which is mentioned in the conclusion of the Theory of
Moral Sentiments, he did not live to fulfil.

In the last part of his lectures, he examined those
political regulations which are founded not upon the
principles of justice, hut that of expediency, and which
are calculated to increase the riches, the power and the
prosperity of a State. Under this view, he considered the
political institutions relating to commerce, to finances, to
ecclesiastical and military establishments. What he de-
livered on these subjects contained the substance of the
work he afterwards published under the title of An In-
quiry into the Nature and Causes of the Wealth of
Nations.

Of the first part of the course little is known,
and that little may easily be interpreted rather in-
gloriously. In his lifetime these disparaging

34 ADAM SMITH AND MODERN SOCIOLOGY

opinions were not silent. They seem to have
fallen early out of tradition, but the suggestion
of them is revived by Haldane.^^
He remarks: ^^

Of what Smith taught in that first part of his four-
fold course at Glasgow .... we have no authentic rec-
ord; but there is abundant internal evidence that it could
not have been anything either very definite, or that com-
mitted him very deeply.

He then broadly hints that Smith held
theological views similar to Hume's, but did not
dare to divulge them in a Scotch university. Al-
though evidence is lacking that Smith was made
of martyr stuff, Haldane's innuendo does not
seem justified. The greater probability is that
Smith's mind was relatively indifferent to meta-
physics, and that he did not strongly grip the
questions which the philosophy of his time raised
with reference to that substratum of philosophy.
As I shall argue later, he shows more virile
affinity for the utilitarians than for the a-priori
philosophers. It is not unlikely that the real

"Li/^ of Adam Smith, by R. B. Haldane, M.P. (London,
1887) ; with a bibliography by John P. Anderson of the British
Museum; i6i-}-x pages. The bibliography is the really
valuable portion of the book.

"P. 20.

THE SOURCES 35

energy of his thinking springs from his ethics
rather than from his theology.^ ^

Turning to the second division of Smith's
moral philosophy, or ethics, it is a gymnastic
feat of no little difficulty to put ourselves long
enough in the mental attitude of Smith and his
contemporaries to understand the quaint classifi-
cation which served their purposes. Although
Dugald Stewart was a pupil of the men to whom
these classifications appealed, he evidently had
his own troubles with them. At the same time
his version of them is helpful. I quote his analy-
sis before speaking of the treatise to which it
must be applied.^ ^

The science of Ethics has been divided by moderns
into two parts ; the one comprehending the theory of
Morals, and the other its practical doctrines. The ques-
tions about which the former is employed are chiefly the
two following: First, by what principle of our constitu-
tion are we led to form the notion of moral distinctions :
— whether by that faculty which, in the other branches of

" Hirst, Adam Smith, Chap. HI, is worth consulting on this
point. Although he would probably have resented Haldane's
slur, if it had been in his mind when he wrote, he throws
something into that side of the scale. A faint light is shed on
this subject by Part HI, Chap. V, of Theory of Moral Senti-
m,ents. (Cf. below, p. 43, and also pp. 53, 54.)

" D. Stewart, Account, etc., of the Theory of Moral Sen-
timents, p. xix.

36 ADAM SMITH AND MODERN SOCIOLOGY

human knowledge, perceives the distinction between truth
and falsehood; or by a peculiar power of perception
(called by some the Moral Sense) which is pleased with
one set of qualities and displeased with another?

Secondly, What is the proper object of moral approba-
tion? or, in other words, what is the common quality or
qualities belonging to all the different modes of virtue?
Is it benevolence; or a rational self-love; or a disposition
(resulting from the ascendency of Reason over Passion)
to act suitably to the different relations in which we
are placed? These two questions seem to exhaust the
whole theory of Morals. The scope of the one is to
ascertain the origin of our moral ideas ; that of the other,
to refer the phenomena of moral perception to their most
simple and general laws.

The practical doctrines of morality comprehend all
those rules of conduct which profess to point out the
proper ends of human pursuit, and the most effectual
means of attaining them; to which we may add all those
literary compositions, whatever be their particular form,
which have for their aim to fortify and animate our good
dispositions, by delineations of the beauty, of the dig-
nity, or of the utility of Virtue.

I shall not inquire at present into the justness of this
division. I shall only observe, that the words Theory and
Practice are not, in this instance, employed in their
usual acceptations. The theory of Morals does not bear,
for example, the same relation to the practice of Morals,
that the theory of Geometry bears to practical Geometry.
In this last science all the practical rules are founded on
theoretical principles previously established. But in the
former science, the practical rules are obvious to the
capacities of all mankind [sic] ; the theoretical princioles

THE SOURCES 37

form one of the most difficult subjects of discussion that
have ever exercised the ingenuity of metaphysicians

According to Mr. Hume, all the qualities which are
denominated virtuous are useful either to ourselves or to
others, and the pleasure which we derive from the view
of them is the pleasure of utility. Mr. Smith, without
rejecting entirely Mr. Hume's doctrine, proposes another
of his own, far more comprehensive; a doctrine with
which he thinks all the most celebrated theories of
morality invented by his predecessors coincide in part,
and from some partial view of which he apprehends that
they have all proceeded.

Of this very ingenious theory, I shall endeavour to give
a short abstract

The fundamental principle of Mr. Smith's theory is,
that the primary objects of our moral judgments with
respect to our own conduct are only applications to our-
selves of decisions which we have already passed on the
conduct of our neighbour. His work accordingly includes
two distinct inquiries, which, although sometimes blended
together in the execution of his general design, it is
necessary for the reader to discriminate carefully from
each other, in order to comprehend all the different bear-
ings of the argument. The aim of the former inquiry is,
to explain in what manner we learn to judge of the
conduct of our neighbour, that of the latter, to show how,
by applying these judgments to ourselves, we acquire a
sense of duty, and a feeling of its paramount authority
over all our other principles of action.

Our moral judgments, both with respect to our own
conduct and that of others, include two distinct percep-
tions; first, A perception of conduct as right or wrong;
and secondly, A perception of the merit or demerit of the

38 ADAM SMITH AND MODERN SOCIOLOGY

agent. To that quality of conduct which moralists, in
general, express by the word Rectitude, Mr. Smith gives
the name of Propriety; and he begins his theory with in-
quiring in what it consists, and how we are led to form
the idea of it. The leading principles of his doctrine on
this subject are comprehended in the following proposi-
tions : —

1. It is from our experience alone that we can form
any idea of what passes in the mind of another person
.... by supposing ourselves in the same circumstances
with him, and conceiving how we should be affected if we

were so situated Sympathy, or fellow-feeling are

two synonymous words expressing our tendency so to
enter into the situations of other men.

2. A sympathy or fellow-feeling between different
persons is always agreeable to both.

3. When the spectator of another man's situation,
. . . . feels himself affected in the same manner ....
he approves of the affection or passion of this
person

By the propriety therefore of any affection or passion
. ... is to be understood its suitableness to the object
which excites it ... . ; the perception of this coincidence
is the foundation of the sentiment of moral approbation."

This citation from Dtigald Stewart sufficiently
indicates two things: first, that Smith's sys-
tem was essentially a theory of moral relations;
second, that it was a theory the content of which
has been outgrown. The most important part of

" This passage is a digest of the five sections into which
Stewart divides Smith's Moral Theory.

THE SOURCES 39

the practical content of the theory may be added
in the words of Hirst: ^^

Every moralist's, even Epictetus's, description of vir-
tue is just, as far as it goes. But Smith claims to have
been the first to give any precise or distinct measure by
which the fitness or propriety of affection can be ascer-
tained and judged. Such a measure he finds in the
sympathetic feelings of the impartial and well informed
spectator. Here, then, we have the central and peculiar
doctrine that stamps with originality Adam Smith's
Theory of Moral Sentiments.

We may remark, in passing, that the idea of
the dispassionate observer served the purpose, in
all Smith's later thinking, which the idea of
"the on-going of the social process" is beginning
to serve in modern dynamic sociology. More
than this, if we analyze the notion of the impar-
tial observer, we find that his opinions can be of
no objective value unless they correctly reflect
the same ultimate standard of judgment which
is in view in the concept ''on-going of the social
process."

No more is necessary for the purpose of the
present inquiry. Stewart's exposition serves to
show the situation more plainly than it could be
seen by brief inspection of Adam Smith's own
works. It shows that the second part of Smith's
system, or "Ethics," was not intended to be what

" Adam Smith, p. 56. Cf. above, p. 35.

40 ADAM SMITH AND MODERN SOCIOLOGY

we now understand by the term. It was by defi-
nition first pure metaphysics, and in development
partly pure metaphysics and partly amateurish
psychology.

By a gradation in which we easily trace a sur-
vival of the Cartesian methodology, the series,
firstj Natural Theology, second, Ethics, shrank
in generality and became increasingly specific
in, third, the theory of Justice, and, fourth, the
theory of Prudence. Whatever we may think
about the classification of the two latter subjects,
Smith made them rather corollaries or emana-
tions from Ethics. His own treatment of Ethics
is to be found in The Theory of Moral Senti-
ments}^ We may get a bird's-eye view of the
system from the titles of its main divisions :

PART I. OF THE PROPRIETY OF ACTION
Section I. Of the Sense of Propriety
Chapter I. Of Sympathy.

Chapter II. Of the Pleasure of Mutual Sympathy.
Chapter III. Of the manner in which we judge of the
Propriety or Impropriety of the Affections of other
Men by their Concord or Dissonance with our own.
Chapter IV. The Same Subject continued.
Chapter V. Of the amiable and respectable Virtues.

"First published 1759; i. e., seventeen years before the
publication of The Wealth of Nations. 1 quote from the Bohn
edition.

THE SOURCES 41

Section II. Of the Degrees of the Different Passions

WHICH ARE consistent WITH PROPRIETY

Chapter I. Of the Passions which take their origin from

the Body.
Chapter II. Of those Passions which take their origin

from a particular turn or habit of the Imagination.
Chapter III. Of the Unsocial Passions.
Chapter IV. Of the Social Passions.
Chapter V. Of the Selfish Passions.

Section III. Of the Effects of Prosperity and Adver-
sity UPON THE JUDGMENT OF MANKIND WITH REGARD
TO THE PROPRIETY OF ACTIONS : AND WHY IT IS "M ORE EASY
TO OBTAIN THEIR APPROBATION IN THE ONE STATE THAN
IN THE OTHER

Chapter I. That though our sympathy with Sorrow is
generally a more lively sensation than our sym-
pathy with Joy, it commonly falls much more short
of the violence of what is naturally felt by the person
principally concerned.

Chapter II. Of the Origin of Ambition and of the dis-
tinction of ranks.

Chapter III. Of the Corruption of our Moral Senti-
ments, which is occasioned by this disposition to
admire the rich and the great, and to despise and
neglect persons of poor and mean condition.

PART II. OF MERIT AND DEMERIT; OR, OF THE
OBJECTS OF REWARD AND PUNISHMENT

Section I. Of the Sense of Merit and Demerit
Chapter I. That whatever appears to be the proper object
of Gratitude, appears to deserve Reward; and that, in
the same manner, whatever appears to be the proper

42 ADAM SMITH AND MODERN SOCIOLOGY

Object of Resentment appears to deserve Punish-
ment.

Chapter 11. Of the proper Objects of Gratitude and
Resentment.

Chapter III. That where there is no Approbation of the
Conduct of the Person who confers the Benefit, there
is little Sympathy with the Gratitude of him who
receives it; and that, on the contrary, where there
is no Disapprobation of the Motives of the Person
who does the Mischief, there is no sort of Sympathy
with the Resentment of him who suffers it.

Chapter IV. Recapitulation of the Foregoing Chapters.

Chapter V. Analysis of the Sense of Merit and De-
merit.

Section II. Of Justice and Beneficence

Chapter I. Comparison of those two Virtues.

Chapter II. Of the sense of Justice, of Remorse, and
of the Consciousness of Merit.

Chapter III. Of the utility of this constitution of nature.

Section III. Of the influence of fortune upon the
Sentiments of Mankind, with regard to the
Merit or Demerit of Actions

Chapter I. Of the causes of this Influence of Fortune.

Chapter II. Of the extent of this Influence of Fortune.

Chapter III. Of the final cause of this irregularity of
Sentiments.

PART III. OF THE FOUNDATION OF OUR JUDG-
MENTS CONCERNING OUR OWN SENTI-
MENTS AND CONDUCT, AND OF THE SENSE
OF DUTY

Chapter I. Of the Principle of Self-approbation and
Self-disapprobation.

THE SOURCES 43

Chapter II. Of the love of Praise, and of that of Praise-
worthiness, and of the dread of Blame, and of
that of Blame-worthiness.

Chapter III. Of the Influence and Authority of Con-
science.

Chapter IV. Of the nature of Self-deceit, and of the
Origin and Use of General Rules.

Chapter V. Of the Influence and Authority of General
Rules of Morality, and that they are justly regarded
as the Laws of the Diety.

Chapter VI. In what cases the Sense of Duty ought to
be the sole principle of our Conduct, and in what
cases it ought to concur with other motives.

PART IV. OF THE EFFECT OF UTILITY UPON
THE SENTIMENT OF APPROBATION

Chapter I. Of the Beauty which the Appearance of Utility
bestows upon all the productions of Art, and of the
extensive influence of this species of Beauty.

Chapter II. Of the Beauty which the Appearance of
Utility bestows upon the Characters and Actions of
Men; and how far the perception of this Beauty
may be regarded as one of the original Principles
of Approbation.

PART V. OF THE INFLUENCE OF CUSTOM AND
FASHION UPON THE SENTIMENTS OF
MORAL APPROBATION AND DISAPPROBA-
TION

Chapter I. Of the Influence of Custom and Fashion
upon our notions of Beauty and Deformity.

Chapter II. Of the Influence of Custom and Fashion
upon Moral Sentiments.

44 ADAM SMITH AND MODERN SOCIOLOGY

PART VI. OF THE CHARACTER OF VIRTUE
Section I. Of the Character of the Individual so far

AS IT affects his OWN HAPPINESS^ OR OF PRUDENCE

Section II. Of the Character of the Individual so

FAR AS it can AFFECT THE HAPPINESS OF OTHER PEOPLE

Chapter I. Of the Order in which Individuals are recom-
mended by nature to our care and attention.

Chapter II, Of the Order in which Societies are recom-
mended by Nature to our Beneficence,

Chapter III, Of Universal Benevolence.

Section III. Of Self-Command

Conclusion of the Sixth Part
PART VII. OF SYSTEMS OF MORAL PHILOSOPHY

Section I. Of the questions which ought to be ex-
amined IN A theory of the MORAL SENTIMENTS

Section II. Of the Different Accounts which have

BEEN GIVEN OF THE NATURfi OF ViRTUE

Chapter I. Of those systems which make Virtue con-
sist in Propriety.

Chapter II, Of those systems which make Virtue consist
in Prudence.

Chapter HI, Of those systems which make Virtue consist
in Benevolence,

Chapter IV. Of Licentious Systems,

Section HI, Of the Different Systems which have

BEEN formed CONCERNING THE PRINCIPLES OF APPRO-
BATION

Chapter I. Of those systems which deduce the Principle
of Approbation from Self-love.

THE SOURCES 45

Chapter 11. Of those systems which make Reason the

Principle of Approbation.
Chapter III. Of those systems which make Sentiment the

Principle of Approbation.

Section IV. Of the Manner in which different au-
thors HAVE TREATED OF THE PRACTICAL RULES OF

Morality

With reference to this system of Moral Phi-
losophy, I repeat, first, that the present argument
is in no way concerned with supporting its spe-
cific contents. In detail it strikes the modern
mind as naive in many ways. The important
matter for us is that it was an attempt to state
life in the large, in moral terms, and that this
attempt drew the broad outlines of the picture of
life within which the economic technique after-
ward analyzed had to find its rating.

In the second place, we should further fortify
our argument by pointing out that the main cur-
rent of moral philosophy in the eighteenth cen-
tury was essentially non-moral in our modern
sense, because it was subjective rather than objec-
tive, individual rather than social. Adam Smith
was a good illustration of this paradox. His
moral philosophy was in the world, but not of the
world, in the sense which makes the difference
both between speculative and positive morals and
between individualistic and social morals. Eight-

46 ADAM SMITH AND MODERN SOCIOLOGY

eenth-century philosophy attempts to explain the
world and its people either from a metaphysical
ground outside of the world and people, or from
a qualitative analysis of the individual mind.
Smith's system of morals, for example, rested on
the principle of approbation in the mental opera-
tions of the individual. For instance, he says: ^"^

When we approve of any character or action, the senti-
ments which we feel are, according to the foregoing sys-
tem, derived from four sources, which are in some re-
spects different from one another. First, we sympathize
with the motives of the agent; secondly, we enter into the
gratitude of those who receive the benefit of his actions;
thirdly, we observe that his conduct has been agreeable to
the general rules by which those two sympathies generally
act; and, last of all, when we consider such actions as
making a part of a system of behaviour which tends to
promote the happiness either of the individual or of the
society, they appear to derive a beauty from this utility,
not unlike that which we ascribe to any well contrived
machine. After deducting, in any one particular case, all
that must be acknowledged to proceed from some one or
other of these four principles, I should be glad to know
what remains ; and I shall freely allow this overplus to
be ascribed to a moral sense, or to any other peculiar
faculty, provided anybody will ascertain precisely what this
overplus is. It might be expected, perhaps, that if there
was any such peculiar principle, such as this moral sense
is supposed to be, we should feel it in some particular
cases, separated and detached from every other, as we

" Moral Sentiments, p. 479.

THE SOURCES 47

often feel joy, sorrow, hope and fear, pure and unmixed
with any other emotion. This, however, I imagine, cannot
ever be pretended. I have never heard any instance
alleged in which this principle could be said to exert itself
alone and unmixed with sympathy or antipathy, with grati-
tude or resentment, with the perception of the agreement
or disagreement of any action to an established rule, or,
last of all, with that general taste for beauty and order
which is excited by inanimated as well as by animated
objects.

In the proposition which the foregoing quo-
tation supports, I beheve I have pointed to a
more precise location of the ultimate principles
of Smith's system than that contained in In-
gram's appreciation : ^^

As a moral philosopher Smith cannot be said to have
won much acceptance for his fundamental doctrine. That
doctrine is, that all our moral sentiments arise from sym-
pathy, that is, from the principle of our nature "which
leads us to enter into the situations of other men, and to
partake with them in the passions which those situations
have a tendency to excite." Our direct sympathy with the
agent in the circumstances in which he is placed gives
rise, according to this view, to our notion of the propriety
of his action, whilst our indirect sympathy with those
whom his actions have benefitted or injured gives rise to
our notions of merit and demerit in the agent himself.

If I correctly interpret the relations of Smith's
psychology to his moral philosophy, he made the

^Encyclopaedia Britannica, 9th ed., article "Adam Smith."

48 ADAM SMITH AND MODERN SOCIOLOGY

subjective process, "approbation," arbiter over
the social process, "sympathy," and not the re-
verse.

If we were studying the growth of psychol-
ogy, instead of the relation of economic to socio-
logical thinking, it would be necessary to devote
some further attention to this element in
Smith's treatment of the moral sentiments.
In brief, the argument is an attempt to get a way
of classifying actions in the objective world by
finding an order of authority in our affections.

In spite of everything, the argument had to
smuggle a value into these moral sentiments
from the observed outward effects of the kinds
of conduct that stimulated them. The futility
and fallacy of this procedure is not even yet very
plain to many people. Although Smith denied
that a special faculty was the arbiter of moral
values, he still held that the standard of moral
value was in consciousness rather than in the
system of cause and effect which the mind has to
interpret. In brief, this eighteenth-century moral
philosophy was a non-moral theory of moral
values. It was an attempt to appraise social sub-
stance in terms of forms of individual apprecia-
tion. It was thus a means of classifying social
phenomena according to subjective categories
and standards. It was not yet on the track of

THE SOURCES 49

the quality of social phenomena as determined
by their objective effects.

If a single paragraph may be chosen as an in-
dex of Smith's method of arriving at a theory
of ethical judgments, perhaps one of the most
typical is found in Part III, Chapter I, of Theory
of Moral Sentiments:

Were it possible that a human creature could grow up
to manhood in some solitary place, without any communi-
cation with his own species, he would no more think of
his own character, of the propriety or demerit of his
own sentiments and conduct, of the beauty or deformity
of his own mind, than of the beauty or deformity of his
own face. All these are objects which he cannot easily
see, which naturally he does not look at, and with regard
to which he is provided with no mirror which can present
them to view. Bring him into society and he is immedi-
ately provided with the mirror which he wanted before.
It is placed in the countenance and behaviour of those he
lives with, which always mark when they enter into,
and when they disapprove of his sentiments ; and it is
here that he first views the propriety and impropriety of
his own passions, the beauty and deformity of his own
mind. To a man who from his birth was a stranger to
society, the object of his passions, the external bodies
which either pleased or hurt him, would occupy his whole
attention. The passions, themselves, the desires or aversions,
the joys or sorrows, which those objects excited, though of all
things the most immediately present to him, could scarce
ever be the objects of his thoughts. The idea of them
could never interest him so much as to call upon his at-

50 ADAM SMITH AND MODERN SOCIOLOGY

tentive consideration. The consideration of his joy could
in him excite no new joy, nor that of his sorrow any new
sorrow, though the consideration of the causes of those
passions might often excite both. Bring him into society,
and all his own passions will immediately become the
causes of new passions. He will observe that mankind
approves of some of them, and are disgusted with others.
He will be elevated in the one case, and cast down in the
other; his desires and aversions, his joys and sorrows,
will now often become the causes of new desires and
new aversions, new joys and new sorrows; they will now,
therefore, interest him deeply, and often call upon his
most attentive consideration.

In this passage approbation in others is made
the cause of approbation in me, and approbation
in me is the criterion of the value of approba-
tion in others. Thus moral sentiments are social
phenomena, but in this scheme society itself is a
sort of ghostly affair at best. Smith's own lan-
guage suggests the analogy with which to de-
scribe it. Society, according to this account,
would seem to be a collection of images reflect-
ing one another back and forth in a group of
mental mirrors; but there is only a hint of a
wraith of reality which first gave the mirrors
something to reflect. This version of moral rela-
tions contains little of the vitality that we now
discover. There is really no admitted criterion of
moral value in Smith's system outside of the
judgments of individuals.

THE SOURCES 51

Yet we must put the emphasis in the last sen-
tence on the word "admitted." In spite of the
individuaHstic and subjectivistic psychology which
Smith inherited, and from which only a few
persons, more than a century later, have worked
themselves partially free, the inevitableness of the
social in the human lot was constantly impress-
ing on him the reality of social relations, though
he kept piously trying to express it in terms of a
sterile individualism. That is, his unanalyzed
perceptions were much more genuinely moral
than his moral theories. ^^

The underlying and implicit dependence of all
moral judgments upon some relation of utility
that is wider in its scope than the consciousness
of individuals sometimes breaks out in explicit
formulation. For instance:

It is thus that man, who can subsist only in society,
was fitted by nature to that situation for which he was
made. All the members of human society stand in need
of each other's assistance, and are likewise exposed to
mutual injuries. Where the necessary assistance is recip-
rocally afforded from love, from gratitude, from friend-
ship, and esteem, the society flourishes and is happy. All

" For illustrations see such passages as the two para-
graphs at the close of Part I, Sec. I, Chap. IV ; the last para-
graph but one in Part I, Sec. II, Chap. II ; the whole of the
two following chapters ; much of Part I, Sec. Ill ; the whole
factor of social utility unconsciously molding the discussion of
"merit and demerit," Part II, etc.

52 ADAM SMITH AND MODERN SOCIOLOGY

the different members of it are bound together by the
agreeable bonds of love and affection, and are, as it
were, drawn to one common centre of mutual good offices.
.... Society cannot subsist among those who are at all
times ready to hurt and injure one another Be-
nevolence, therefore, is less essential to the existence of
society than justice. Society may subsist, though not in
the most comfortable state, without beneficence; but the
prevalence of injustice must utterly destroy it."

It is difificult ill our clay to understand how a
man of Adam Smith's acuteness could have been
so near to the premises of an objective moral
philosophy, without doing as much to develop it
in form as he did in spirit. Later in the same
chapter he expressly denies that we learn to ap-
prove useful conduct and abhor the harmful
through perception of its consequences. This is
survival of the sense of duty to save the face of
dogma, rather than to accept the full value of
discovery. But this denial does not weaken the
thesis that Smith regards human society as sub-
ject to the laws of a sovereign moral system,
whatever we may think of his conceptions of that
system. Thus, at the close of the chapter just
quoted, he remarks :

For it well deserves to be taken notice of, that we are
so far from imagining that injustice ought to be punished
in this life, merely on account of the order of society,

=* Begitming of Part II, Sec. II, Chap. III.

THE SOURCES 53

which cannot otherwise be maintained, that nature teaches
us to hope, and religion, we suppose,"^ authorizes us to
expect, that it will be punished even in a life to come.
Our sense of its ill desert pursues it, if I may say so,
even beyond the grave, though the example of its punish-
ment there cannot serve to deter the rest of mankind,
who see it not, who know it not, from being guilty of the
like practices here. The justice of God, however, we
think, still requires, that he should hereafter avenge the
injuries of the widow and the fatherless, who are here
so often insulted with impunity. In every religion, and
in every superstition that the world has ever beheld, ac-
cordingly, there has been a Tartarus as well as an Elys-
ium ; a place provided for the punishment of the wicked,
as well as one for the reward of the just.

Smith gives much more direct expression of
his beHef that our moral judgments, whether on
matters of greater or less importance, or how-
ever we may suppose them to have originated,
are, like the actions which they appraise, all re-
sponsible to a final scheme of moral order, in
such language as the following:

Upon whatever we suppose that our moral faculties
are founded, whether upon a certain modification of
reason, upon an original instinct, called a moral sense, or
upon some other principle of our nature, it cannot be
doubted that they were given us for the direction of our
conduct in this life. They carry along with them the

^ Probably Haldane would cite this sentence as evidence
that Smith's religious convictions were not perfervid ! Cf.
above, p. 34.

54 ADAM SMITH AND MODERN SOCIOLOGY

most evident badges of this authority, which denote that
they were set up within us to be the supreme arbiters of
all our actions, to superintend all our senses, passions and
appetites, and to judge how. far each of them was either

to be indulged or restrained The happiness of

mankind, as well as of all other rational creatures, seems
to have been the original purpose intended by the Author

of Nature when he brought them into existence

By acting according to the dictates of our moral faculties,
we necessarily pursue the most effectual means for pro-
moting the happiness of mankind, and may therefore be
said, in some sense, to co-operate with the Deity; and to
advance, as far as in our power, the plan of providence.
By acting otherwise, on the contrary, we seem to obstruct,
in some measure, the scheme which the Author of Nature
has established for the happiness and perfection of the
world, and to declare ourselves, if I may say so, in some
measure the enemies of God. Hence we are naturally en-
couraged, to hope for his extraordinary favour and re-
ward in the one case, and to dread his vengeance and
punishment in the other.^

From a quite different angle of approach,
Smith arrives at an assertion of the final author-
ity of moral law, in Part III, Chapter VI :

There is, however, one virtue, of which the general
rules determine, with the greatest exactness, every ex-
ternal action which it requires. This virtue is Justice.
The rules of justice are accurate in the highest degree,
and admit of no exceptions or modifications, but such as
may be ascertained as accurately as the rules themselves,

^ Part III, Chap. V.

The sources 55

and which generally, indeed, flow from the very same

principles with them In the practice of the other

virtues, our conduct should rather be directed by a certain
idea of propriety, by a certain taste for a particular tenor
of conduct, than by any regard to a precise maxim or
rule; and we should consider the end and foundation of
the rule more than the rule itself. But it is otherwise
with regard to justice; the man who in that refines tlie
least, and adheres with the most obstinate steadfastness
to the general rules themselves, is the most commend-
able, and the most to be depended upon

The rules of justice may be compared to the
rules of grammar; the rules of the other virtues to the
rules which critics lay down for the attainment of what
is sublime and elegant in composition. The one are pre-
cise, accurate, and indispensable. The other are loose,
vague, and indeterminate.

No wonder that a man who indulged such a
serene faith that the rules of justice were settled
once for all, could feel perfectly secure in leaving
them to take care of themselves, while he turned
his attention to the rules of prudence! One is
reminded of the scarcely less naive belief of
John Stuart Mill, that the theory of value had
been settled once for all.^^

^ "Happily, there is nothing in the laws of Value which
remains for the present or any future writer to clear up ;
the theory of the subject is complete ; the only difficulty to
be overcome is that of so stating it as to solve by anticipation
the chief perplexities which occur in applying it ; . . . . —
J. S. Mill, Political Economy, 5th ed., Appletons, 1897, Vol. I,
P. 537-

56 ADAM SMITH AND MODERN SOCIOLOGY

Just as the nature of value was already be-
ginning to be the nightmare among economic
problems before Mill died, so the nature and im-
plications of justice have become the central
problems of all positive moral philosophy. To
one who posited a pre-established natural har-
i':ony, and called that harmony "justice," and
supposed that the key of the system was securely
in his possession, the open questions about the
conduct of life would necessarily be those of pru-
dence only. The moment of the discovery that
in an evolving society justice is a matter of
adaptation; that it is dynamic, not static; that,
even if we knew its fitnesses today, they may
become misfits tomorrow — that moment we learn
that justice is not a code of invariable rules, but
an adjustment of incessantly changing relations.
Thereupon we encounter the deeper problems of
morals: What is the meaning of human life,
and how may we adjust our conduct accordingly?
These are not closed but open questions. Smith's
inherited static notions of society estopped the
conception that fundamental moral relations
could be problematical. They were settled
in advance. The duty of men was to take them
for granted, and with serious respect for them
to find out as much as possible about relations
that are less certain. With the breaking-down of

THE SOURCES 57

the static preconception that has followed the
work of Darwin all along the philosophic line,
the moral philosophy, or sociology; which Smith
could assume as a major premise, has come to
be the unknown quantity. To use the Spencerian
idiom, the sentiment of justice occupies the same
place in modern social philosophy which it held
in Smith's system; the idea of justice is getting,
and must get, a changing content with the
changes in human relations and with the
progress of analysis of those relations.

One more quotation may suffice to justify the
theorem that Adam Smith's philosophy started
with the conception of a divine order, supporting
a moral harmony, within which the technical pru-
dences of life are mere details. In Part VI, Sec-
tion II, Chapter III, he says:

The wise and virtuous man is at all times willing that
his own private interest should be sacrificed to the greater
interest of the State or sovereignty of which it is only a
subordinate part; he should, therefore, be equally willing
that all those inferior interests should be sacrificed to the
greater interests of the universe, to the interest of that
great society of all sensible and intelligent beings of
which God himself is the immediate administrator and
director. If he is deeply impressed with the habitual and
thorough conviction that this benevolent and all-wise
Being can admit into the system of his own government no
partial evil which is not necessary for the universal good,
he must consider all the misfortunes which may befall

58 ADAM SMITH AND MODERN SOCIOLOGY

himself, his friends, his society, or his country, as neces-
sary for the prosperity of the universe, and, therefore,
as what he ought not only to submit to with resigna-
tion, but as what he himself, if he had known all the con-
nections and dependencies of things, ought sincerely and
devoutly to have wished for.

Nor does this magnanimous resignation to the will of
the great Director of the universe seem in any respect

beyond the reach of human nature A wise man

should surely be capable of doing what a good soldier
holds himself at all times in readiness to do.

The idea of that divine Being, whose knowledge and
wisdom have from all eternity contrived and conducted
the immense machine of the universe so as at all times
to produce the greatest possible quantity of happiness, is
certainly, of all the objects of human contemplation, by
far the most sublime. Every other thought necessarily
appears mean in the comparison

The administration of the great system of the universe,
however, the care of the universal happiness of all rational
and sensible beings, is the business of God, and not of
man. To man is allotted a much humbler department,
but one much more suitable to the weakness of his
powers, and to the narrowness of his comprehension, —
the care of his own happiness, of that of his family, his
friends, his country: that he is occupied in contemplating
the more sublime, can never be an excuse for his neglect-
ing the more humble departments ; and he must not ex-
pose himself to the charge which Avidius Cassius is said
to have brought, perhaps unjustly, against Marcus An-
toninus, that while he employed himself in philosophical
speculations, and contemplated the prosperity of the uni-
verse, he neglected that of the Roman Empire. The

THE SOURCES 59

most sublime speculation of the contemplative philoso-
pher can scarce compensate the neglect of the smallest
active duty.

For a century it was supposed that no part of
Adam Smith's lectures while a professor at Glas-
gow had been preserved except those portions
which appeared in the Theory of Moral Senti-
ments and in The Wealth of Nations. A manu-
script was found, however, and published in 1896
by Mr. Edwin Cannan, the title-page of which
reads :

Juris Prudence, or Notes from the Lectures on Jus-
tice, Police, Revenue, and Arms delivered in the Univer-
sity of Glasgow by Adam Smith, Professor of Moral
Philosophy. MDCCLXVI.'*

For students of certain phases of Adam
Smith's thinking, this rather crude report of his
lectures is of great value. It adds nothing to the
evidence needed for our present inquiry, beyond
an exhibit of the details of justice which, as we
saw above,^^ Smith regarded as immutable. We
need notice further only that the report as it
stands might almost be used as a syllabus of con-
siderable portions of The Wealth of Nations.
These include both the political and the economic

"Cannan, Lectures of Adam Smith (Oxford: Clarendon
Press; xH-l-293 pages; see "Editor's Introduction," p. xli).

"" P. 55.

6o ADAM SMITH AND MODERN SOCIOLOGY

portions of the latter work. They have also a
bearing on the question to which we shall be
obliged to return,^^ viz. : What was the rela-
tion of Smith's political science to his economic
science? Considered as a syllabus, or prospectus,
or first draft, as it was in effect, the course of
lectures is of value in proof that The Wealth of
Nations is not a detached monograph. It is
rather of the very texture of Smith's moral
philosophy.

In other words, we have here the means, even
if they were otherwise lacking, for disposing
of the whole brood of theories of which Skarzyn-
ski's may serve as an edifying example; viz.,
that Smith was changed from an idealist into a
materialist by his sojourn in France, and that
The Wealth of Nations represents Smith's views
in the latter character, as contrasted with the
abandoned views of the Theory of Moral Senti-
ments.^'^
2" Pp. 209 ff.

^ W. Skarzynski, Adam Smith ah Moralphilosoph und
Schopfer der N ationalokonomie (Berlin, 1886). Skarzynski not
only places himself in direct opposition to Oncken (cf. above,
pp. 5, and 29-32), but his book of nearly 500 pages is virtually
an attempt to prove that Adam Smith was neither a great man
nor a great thinker. Whether Adam Smith was "great" or
not, in any sense, is a question which those may discuss who
have time for that futile type of inquiry. It is enough that he
has been, and still is, influential. He is among the men whose

THE SOURCES 6i

The view on which the present study is based
has never been expressed more forcibly than by
Bagehot : ^^

Lord Bacon says of some one that he was "like
Saul" who went in search of his father's asses and
found a "kingdom;" and that is exactly what happened
to Adam Smith. He was engaged in a scheme of vast
research, far surpassing the means at his disposal, and
too good for any single man. In the course of that great
pursuit, and as a small part of it, he came upon The
Wealth of Nations, for dealing with which his powers
and his opportunities peculiarly fitted him, and on that
he wrote a book, which has itself deeply influenced thought
and policy, and which has been the beginning of a new

5. This book is not a critique of Adam
Smith's economic doctrines.

Hirst has vividly described a certain estimate
of political economy which had more reputable
sponsors a generation ago than it could find
today : ^^

A heated imagination, certainly not encumbered with
facts, and informed only that Adam Smith was the
founder of an odious science, denounced him as "the

work would have had to be done by somebody, or knowledge
could not have advanced to its present stage. The pertinent
question is as to the precise work that Smith did, and as to
the work still undone in the line of his beginnings.

^Economic Studies, p. 133. '^ Adam Smith, p. 183.

62 ADAM SMITH AND MODERN SOCIOLOGY

half-bred and half-witted Scotchman" who taught "the
deliberate blasphemy" — "Thou shalt hate the Lord thy
God, damn His Laws, and covet thy neighbor's goods."
The same authority declares that he "formally in the name
of the philosophers of Scotland, set up this opposite God,
on the hill of cursing against blessing, Ebal against Geri-
zim, — a God who allows usury, delights in strife and
contention, and is very particular about everybody's going
to his synagogue on Sunday."^" These three character-
istics of Adam Smith's deity were unfortunately chosen;
for, as it happens, he disliked usury so much that he de-
fended the laws which had vainly sought to prevent high
rates of interest; disapproved vehemently of war, which
he regarded as one of the deadliest enemies of human
progress, and protested against the idea that a perfect
Deity could possibly desire His creatures to abase them-
selves before Him. It is sad to think that to get his
gold the Ruskinian must pass so much sand through his
mind. The Fors Clavigera, with all its passionate in-
tensity and high-strung emotion, is a standing warning
to preachers not to abuse their masters, and to learn a
subject before they teach it. Let those who climb so
recklessly on Ebal deliver their curses from a safer
foothold.'^

On the other hand, Hirst has quite clearly ex-

^^ See Ruskin, Fors Clavigera, Letters 62 and y2.

'* An interpretation somewhat in the spirit of Hirst's pro-
test, and rather clearly showing that it is a peculiarly shallow
misconception to suppose that Smith was a glorifier of selfish-
ness, is to be found in the expansion of an academic address
by Dr. Wilhelm Neurath, Adam Smith im Lichte heutiger
Staats- tind Socialauffassung (Vienna, 1884).

THE SOURCES 63

pressed the presumption with which this study
was undertaken : ^^

The truth, as Smith conceived it, is that men are
actuated at different times by different motives, benevo-
lent, selfish, or mixed. The moral criterion of an action
is: will it help society, will it benefit others, will it be
approved by the Impartial Spectator? The economic cri-
terion of an action is : will it benefit me, will it be profit-
able, will it increase my income? Smith built his theory
of industrial and commercial life upon the assumption that
wage-earners and profit makers are generally actuated
by the desire to get as high wages and profits as pos-
sible. If this is not the general and predominant motive
in one great sphere of activity, the production
and distribution of wealth. The Wealth of Nations
is a vain feat of the imagination, and political economy
is not a dismal science but a dismal fiction. But there is
nothing whatever either to excite surprise or to suggest
inconsistency in the circumstance that a philosopher, who
(to adopt the modern jargon of philosophy) distinguished
between self-regarding and other-regarding emotions,
should have formed the first group into a system of
economics and the second into a system of ethics.

Since it is not extravagant hyperbole to de-
scribe nineteenth-century poHtical economy as a
progressive testing of the economic doctrines of
Adam Smith, we have a specific case under
Schiller's generalization, "The world's history is
the world's assize." To criticize Adam Smith

^^Loc cit., p. 182.

64 ADAM SMITH AND MODERN SOCIOLOGY

adequately, as an economist, would call for a
mobilization of everything added or opposed to
his economic teachings, in the whole interme-
diate literature. But, if this were feasible, it
would be outside the scope of this study. With
Smith's economics, as such, so far as the theories
can be regarded as separable from morals, I have
no concern whatsoever. That is a technological
affair about which I profess no competence. Nor
is this the place for a discussion of the bibliog-
raphy of economic criticism. If it can be
imagined that anyone could have followed this
discussion thus far, who is not already tolerably
familiar with the landmarks of modern economic
science, reference may be made to the two most
convenient handbooks of the subject — Cossa's In-
troduction to the Study of Political Economy,^^
and Ingram's History of Political Economy. ^'^
Professor A. C. Miller presented a masterly sur-
vey of the whole economic movement of the nine-
teenth century at the St. Louis Congress of Arts
and Science. ^^

^ Revised by the author and translated by Louis Dyer
(1893).

»* Preface by E. J. James (1888).

^ Ecowomic Science in the Nineteenth Century, Congress
of Arts and Science, Vol. VII, p. 21.

THE SOURCES 65

6. This book is an attempt to show the

MEANING OF AdAM SmITH's ECONOMIC
TEACHINGS FOR THAT METHOD OF INVESTI-
GATING MORAL RELATIONS WHICH WE NOW
CALL SOCIOLOGY.

In Other words, it is purely a contribution to
sociological methodology. Instead of following
the usual procedure of developing abstract prin-
ciples algebraically, I shall use Smith's analysis
as concrete material to bring into view sociologi-
cal relations which pure economics overlooks or
ignores. ^^

If Adam Smith had lived until today, and
had reiterated certain of his general views about
the fundamental conditions of economic rela-
tions, he would be classed as a socialist, without
benefit of clergy. At the same time, contrasted
views have been developed from his principles,
and these latter have formed the tradition with
which his memory is most closely associated.
It is a part of the irony of fate that his name has
been made synonymous with a conception of
economics which was essentially alien to his real
views. The substance of the explanation is, then,

" For the different editions of The Wealth of Nations refer-
ence may again be made to Anderson's bibliography, appended
to Haldane. All references in this essay are to the edition of
Ernest Belfort Bax ("Bohn's Libraries," London, 1905).

66 ADAM SMITH AND MODERN SOCIOLOGY

to recapitulate, first, that Smith's economic sys-
tem has been considered apart from the whole
system of moral philosophy of which it was a
fragment; and, second, that the doctrines which
Smith formulated quite largely with reference
to the then existing industrial conditions have
been treated by his successors as having a degree
of absoluteness which he never expressly claimed.
If he had lived until the revolution was fully
accomplished, he would, without much doubt,
have returned to some of the fundamentals in his
moral theory, as basis for restatements of the
derived doctrines which have been used to bolster
capitalism in the modern sense.

I repeat, then, the main proposition: The
Wealth of Nations was essentially a technological
treatise; i.e., ''An enquiry into the nature and
causes of the wealth of nations/' In other
words, the "natural world" and the type of in-
dustry being that which Adam Smith knew in
Great Britain, what was the technique of the
whole process? It was just as though someone
should today write a treatise on the best way of
operating our national banking system. It is
conceivable that in a generation we might widely
extend the principle of "asset banking." It is
conceivable that this change might so far modify
the whole system that many of the principles

THE SOURCES 67

Stated generally in today's treatise would have to
be withdrawn or restated. Perhaps it would
have to be said that they applied in the original
form only so far as the banking system then in
operation was still in force.

Something close to this is the case with much
of Smith's work, which became part of the
"Classical Political Economy." It is true, if
certain presuppositions are granted. It is not
true if those presuppositions fail to represent the
social situation.

Partly as an excursus, and partly as a direct
advance in the line of the proposed inquiry, I
take this occasion to comment on a passage in
Bagehot which has often been misunderstood.^^
The point raised will be referred to less directly
elsewhere in this essay.

Bagehot opens his chapter entitled "Adam
Smith and Our Modern Economy," with this
paragraph :

If we compare Adam Smith's conception of Political
Economy with that to which we are now used, the most
striking point is that he never seems aware that he is
dealing with what we should call an abstract science at
all. The "Weahh of Nations" does not deal, as do our
modern books, with a fictitious human being hypotheti-
cally simplified, but with the actual concrete men who

" Walter Bagehot, Economic Studies (2d ed., London,
1888).

68 ADAM SMITH AND MODERN SOCIOLOGY

live and move. It is concerned with Greeks and Romans,
the nations of the middle ages, the Scotch and the English,
and never diverges into the abstract world. Considering
the natural progress of opulence as an item in greater
studies, as part of the natural growth of human civiliza-
tion, Adam Smith always thought how it had been affected
by human nature, taken as a whole.

This paragraph has sometimes been cited as
committing Bagehot to a judgment of Smith
which was quite the opposite of his actual opin-
ion. The truth appears when the language is
interpreted in the light of an earlier passage,
viz. : ^^

. ... in my judgment, there are three defects in the
mode in which Political Economy has been treated in
England, which have prevented people from seeing what
it really is, and from prizing it at its proper value.

First, — It has often been put forward, not as a theory
of the principal causes affecting wealth in certain societies,
but as a theory of the principal, sometimes even of all,
the causes affecting wealth in every society

Secondly, — I think in consequence of this defect of con-
ception Economists have been far more abstract, and in
consequence much more dry, than they need have been.
If they had distinctly set before themselves that they were
dealing only with the causes of wealth in a single set of
societies, they might have effectively pointed their doc-
trines with facts from those societies. But, so long as
the theory vaguely floated before them, they shrank from
particular illustrations

^* Lac. cit., pp. 1 6-1 8.

THE SOURCES 69

Thirdly, — It is also in consequence, as I imagine, of
this defective conception of their science, that English
Economists have not been as fertile as they should have
been in verifying it. They have been too content to remain
in the "abstract" and to shrink from concrete notions,
because they could not but feel that many of the most
obvious phenomena of many nations did not look much
like their abstractions

The particular Political Economy which I have been
calling the English Political Economy, is that of which the
first beginning was made by Adam Smithl^

It is more than likely that in the above passage
Bagehot had John Stuart Mill very clearly in
his mind's eye. In the preface to his Political
Economy Mill expressed a judgment of Smith's
method less divergent from Bagehot's than
appears at first glance. In stating the aims of
his own book, Mill says :

The design of the book is different from that of any
treatise on Political Economy which has been produced in
England since the work of Adam Smith.

The most characteristic quality of that work, and the
one in which it most differs from some others which
have equalled or even surpassed it as mere expositors of
the general principles of the subject [did the author refer
to his father's textbook?], is that it invariably associates
the principles with their application. This of itself im-
plies a much wider range of ideas and of topics than are
included in political economy, considered as a branch
of abstract speculation. For practical purposes, political

'" Italics mine.

70 ADAM SMITH AND MODERN SOCIOLOGY

economy is inseparably bound with many other branches
of social philosophy. Except in matters of mere detail,
there are perhaps no practical questions, even among
those which approach nearest to the character of purely
economical questions, which admit of being decided on
economical premises alone. And it is because Adam
Smith never loses sight of this truth ; because, in his ap-
plications of Political Economy, he perpetually appeals to
other and often far larger considerations than pure Politi-
cal Economy affords — that he gives that well-grounded
feeling of command over the principles of the subject
for purposes of practice, owing to which the Wealth of
Nations, alone among treatises on Political Economy,
has not only been popular with general readers, but has
impressed itself strongly on the minds of men of the
world and legislators.

It appears to the present writer, that a work similar
in its objects and general conception to that of Adam
Smith, but adapted to the more extended knowledge and
improved ideas of the present age, is the kind of contribu-
tion which Political Economy at present requires.

Bagehot's more extended analysis of Adam
Smith's economic method repays careful atten-
tion. The following is the remainder of the
first section in the chapter of which the first para-
graph was quoted above.^^

Adam Smith approximates to our modern political
economists because his conception of human nature is so
limited. It has been justly said that he thought "there
was a Scotchman inside every man." His Theory of

^'^ Economic Studies, pp. 95 ff. (Cf. above, p. 67.)

THE SOURCES 71

Moral Sentiment [sic], indeed, somewhat differs in
tone, but all through the Wealth of Nations the desire of
man to promote his pecuniary interest is treated as far
more universally intense, and his willingness to labour
for that interest as far more eager and far more com-
monly diffused, than experience shows them to he*^
Modern economists, instructed by a larger experience,
well know that the force of which their science treats
is neither so potent nor so isolated as Adam Smith
thought. They consistently advanced as an assumption
what he more or less assumes as a fact.

Perhaps a little unfairly, nothing has more conduced to
the unpopularity of modern political economists, and to
the comparative fame of Adam Smith, than this superior-
ity of their view over his. Of course Adam Smith was
infinitely too sensible a man to treat the desire to attain
wealth as the sole source of human action. He much
overrated its sphere and exaggerated its effect, but he was
well aware that there was much else in human nature
besides. As a considerate and careful observer of man-
kind, he could not help being aware of it. Accordingly he
often introduces references to other motives, and de-
scribes at length and in an interesting way, what we
should now consider non-economic phenomena; and,
therefore, he is more intelligible than modern econo-
mists, and seems to be more practical. But in reality he
looks as if he were more practical, only because his analy-
sis is less complete. He speaks as if he were dealing with
all the facts of human nature, when he is not; modern

" Bagehot does not take the trouble to cite the title of
Smith's Theory accurately. I find no evidence that he knew
it at first hand. His comparison between the essay and The
Wealth of Nations has the effect, therefore, of a random shot.

72 ADAM SMITH AND MODERN SOCIOLOGY

economists know their own limitations ; they would no
more undertake to prescribe for the real world, than a
man in green spectacles would undertake to describe the
colours of a landscape.*^ But the mass of mankind have
a difficulty in understanding this. They think Adam Smith
practical because he seems to deal with all the real facts
of man's life, though he actually exaggerates some, and
often omits others; but they think modern economists un-
practical because they have taken the most business-like
step towards real practice — that of dealing with things one
at a time.

And it is precisely this singular position of Adam
Smith which has given him his peculiar usefulness. He
fulfilled two functions. On the one hand, he prepared
the way for, though he did not found, the abstract science
of Political Economy. The conception of human nature
which underlies the Wealth of Nations, is near enough
to the fictitious man of recent economic science to make
its reasonings often approximate to, and sometimes coin-
cide with, those which the stoutest of modern economists
might use. The philosophical and conscious ap-
proximation which we now use has been gradually framed
by the continual purification of the rough and vague idea
which he employed. In this way Adam Smith is the legiti-
mate progenitor of Ricardo and of Mill. Their books
would not have been written in the least as they are now,
most likely would never have been written at all, unless
Adam Smith, or some similar writer, had written as he
has. But, on the other hand, Adam Smith is the be-
ginner of a great practical movement too. His partial

*^ In a later essay, when the economists contemporary with
Bagehot are under review, I shall enjoy a casual outing with
this fine feat of imagination! (Cf. below, p. 218.)

THE SOURCES 73

conception of human nature is near enough to the entire
real truth of it to have been assumed as such in his own
mind, and to be easily accepted as such by the multitude
of readers. When he writes he writes about what inter-
ests most practical men in a manner which every one will
like who is able to follow any sort of written reasoning;
and in his time there was a great deal of most important
new truth, which most practical people were willing to
learn, and which he was desirous to teach. It is difficult
for a modern Englishman, to whom "Free Trade" is an
accepted maxim of tedious orthodoxy, to remember suffi-
ciently that a hundred years ago it was a heresy and a
paradox. The whole commercial legislation of the world
was framed on the doctrines of protection; all financiers
held them, and the practical men of the world were
fixed in the belief of them. "I avow," says Monsieur
Mollien, the wise Finance Minister of the First Napoleon,
"to the shame of my first instructors," the previous
officials of France, "that it was the book of Adam
Smith, then so little known, but which was already de-
cried by the administrators with whom I had served,
which taught me better to appreciate the multitude of
points at which public finance touches every family, and
which raised judges of it in every household." There
were many free-traders before Adam Smith, both writers
and men of business, but it is only in the antiquarian
sense in which there were "poets before Homer, and kings
before Agamemnon." There was no great practical
teacher of the new doctrine; no one who could bring it
home to the mass of men; who connected it in a plain
emphatic way with the history of the past and with the
facts of the present ; who made men feel that it was not a
mere "book theory," but a thing which might be, and

74 ADAM SMITH AND MODERN SOCIOLOGY

ought to be real. And thus (by a good fortune such as
has hardly happened to any other writer) Adam Smith
is the true parent of Mr. Cobden and the Anti-Corn Law
League, as well as of Ricardo and of accurate Political
Economy. His writings are semi-concrete, seeming to be
quite so, and, therefore, they have been the beginnings of
two great movements, one in the actual, and the other in
the abstract world.

Probably both these happy chances would have amazed
Adam Smith, if he could have been told of them. As
we have seen, the last way in which he regarded Political
Economy was as a separate and confined specialty ; he
came upon it as an inseparable part of the development
of all things, and it was in that connection that he habitu-
ally considered it. The peculiar mode of treating the
subject which we now have had never occurred to him.
And the idea of his being the teacher, who more than any
one else caused Free Trade to be accepted as the cardinal
doctrine of English policy, would have been quite as
strange to him. He has put on record his feelings : — "to
expect, indeed, that the freedom of trade should ever be
entirely restored in Great Britain, is as absurd as to
expect that an Oceania or Utopia should ever be estab-
lished in it. Not only the prejudices of the public, but
what is more unconquerable, the private interests of many
individuals, irresistibly opposed it. Were the officers of
the army to oppose with the same zeal and unanimity,
any reduction in the number of forces, with which master
manufacturers set themselves against every law that is
likely to increase the number of their rivals in the home
market; were the former to animate their soldiers, in the
same manner as the latter enflame their workmen, to
attack with violence and outrage the proposers of any

THE SOURCES 75

such regulation; to attempt to reduce the army would be
as dangerous as it has now become to attempt to diminish
in any respect the monopoly which our manufacturers
have pbtained against us. This monopoly has so much
increased the number of some particular tribes of them,
that, like an overgrown standing army, they have become
formidable to the Government and upon many occasions
intimidate the legislature. The member of parliament
who supports every proposal for strengthening this mo-
nopoly is sure to acquire the reputation not only of under-
standing trade, but great popularity and influence with an
order of men whose numbers and wealth render them of
great importance. If he opposes them, on the contrary, and
still more if he has authority enough to be able to thwart
them, neither the most acknowleged probity, nor the
highest rank, nor the greatest public services can protect
him from the most infamous abuse and detraction, from
personal insults, nor sometimes from real danger, arising
from the insolent outrage of furious and disappointed
monopolists."

Yet, in fact, the "Utopia" of Free Trade was introduced
into England by the exertions of the "master manufac-
turers;" and those who advocated it, and who were
"thought to understand trade," said that they had learned
the doctrines they were inculcating from The Wealth of
Nations, above and beyond every other book.

Mr. Bagehot's own account thus aids the closer
inspection which shows that he and Mill were
both right. In the first passages compared they
were not referring to the same factors of Smith's
method. The former had in view the premature

76 ADAM SMITH AND MODERN SOCIOLOGY

generalizations, the insufficient inductions, fre-
quent in The Wealth of Nations, although they
were drawn from concrete historical material.
The latter had in mind the use to which Smith
wanted to put his generalizations after he reached
them.

That is, as we shall have occasion to repeat,
in spite of the admirable concreteness of Smith's
style, he followed not a single consistent method,
but he exhibited the strengths and the weak-
nesses, the virtues and the vices, of both the
abstract, deductive method, and the concrete,
historical method, together with the contrasts
between pure science and a social program. Dis-
ciples who have carried each of the scientific
methods to the limit legitimately call him
master.^^

In trying to assign the reason why the
influence of economic theory had waned,^^ Bage-
hot did not sufficiently allow for another crude-
ness that is evident in Smith, as well as in the
later classical economists ; viz. : the technological
content of classical economics presupposed a more
statical condition of society than has proved to be

"In this bifurcation of a method the French sociologists
have a similar case — the two schools of the followers of
Le Play.

** Loc cit., p. 3.

THE SOURCES 77

the case. Not only was this virtually unrecog-
nized at Smith's time, but even when Bagehot
wrote a century later, no strong movement had
appeared for reconsideration of those statical
preconceptions.

Returning from the excursus and reducing the
whole matter to its briefest form, this is our
theorem :

Political Economy, as viewed by Adam Smith, was
the technology of a practical art which was strictly re-
sponsible to a moral philosophy that correlated all human
activities. Political economy, after Adam Smith, lost its
sense of connection with the large moral process, and
became the mystery of the craft of the capitalizer. We
propose an inspection of Adam Smith's economic system,
for the purpose of showing that in his mind there was
no antithesis, still less a divorce, between economic tech-
nology and sociology; and that the organization of the two
in his philosophy rested upon a general conception of the
subordinate relationship of all specific activities within an
inclusive moral system, to which, in effect, though not
in detail, all students of society must ultimately return.

Ill

THE ECONOMICS AND SOCIOLOGY OF
LABOR

With the foregoing propositions sufficiently
emphasized, we may return to The Wealth of
Nations itself, and by a second survey confirm
the general theorem already variously stated;
viz. : The whole treatise was primarily a tech-
nological inquiry, with the ways and means of
producing national wealth as its objective; it as-
sumed that this interest had a value of its own;
at the same time it assumed that this interest in
production is tributary to the interest in con-
sumption ; it assumes, further, that the wealth in-
terest in general is but a single factor in the total
scheme of human and divine purposes, and that,
whatever the technique of satisfying the wealth
interest may prove to be, the place of that inter-
est in the whole harmony of human relations
has to be established by a calculus in whose equa-
tions the formulas of economic technique are
merely subordinate terms.

All of this was understood by Smith's friend
Dugald Stewart, and it was uttered by him with
sufficient clearness more than a century ago. It

79

8o ADAM SMITH AND MODERN SOCIOLOGY

may assist our own insight to recall some of his
words : ^

The foregoing very imperfect hints appear to me to
form not only a proper, but in some measure a necessary
introduction to the few remarks I have to offer on Mr.
Smith's Inquiry: as they tend to illustrate a connection be-
tween his system of commercial politics [sic], and those
speculations of his earlier years in which he aimed more
professedly at the advancement of human improvement
and happiness. It is this view of political economy that can
alone render it interesting to the moralist, and can dig-
nify calculations of profit and loss in the eye of the philoso-
pher. Mr. Smith has alluded to it in various passages of
his work, but he has nowhere explained himself fully on
the subject; and the great stress he has laid on the divi-
sion of labour in increasing its productive powers, seems
at first sight, to point to a different and very melancholy
conclusion : — that the same causes which promote the prog-
ress of the arts, tend to degrade the mind of the artist;
and, of consequence, that the growth of national wealth
implies a sacrifice of the character of the people.

The fundamental doctrines of Mr. Smith's system
are now so generally known, that it would be tedious to
offer any recapitulation of them in this place, even if I
could hope to do justice to the subject, within the limits
which I have prescribed to myself. I shall content myself,
therefore, with remarking, in general terms, that the great
and leading object of his speculations is, to illustrate the
provisions made by nature on the principles of the human
mind, and in the circumstances of man's external situa-
tion, for a gradual and progressive augmentation in the

* Account, etc., p. liv.

ECONOMICS AND SOCIOLOGY OF LABOR 8i

means of national wealth; and to demonstrate that the
most effectual plan for advancing a people to greatness, is
to maintain that order of things which nature has pointed
out, by allowing every man, as long as he observes the
rules of justice, to pursue his own interest in his own way,
and to bring both his industry and his capital into the
freest competition with those of his fellow citizens. Every
system of policy which endeavours either by extraordinary
encouragements to draw toward a particular species of
industry a greater share of the capital of the society than
what would naturally go to it, or, by extraordinary re-
straint, to force from a particular species of industry
some share of the capital which would otherwise be
employed in it, is, in reality, subversive of the great pur-
pose which it means to promote.

In Other words, what we know of Adam
Smith's whole scheme of thinking justifies the
interpretation that, as it presented itself to his
mind, what we now formulate as the general
sociological problem might be explained as fol-
lows:

The destiny of mankind is to work out a cer-
tain moral achievement. The great intellectual
task is to understand the conditions and impli-
cations of that destiny. There are certain grand
divisions of that task. Not touching upon those
which belong within the ^cope of so-called
natural or physical science, the first division of
the intellectual problem of discovering the con-
ditions and implications of human destiny — that

82 ADAM SMITH AND MODERN SOCIOLOGY

is, the terms in accordance with which mankind
must learn how to achieve well-being, or happi-
ness, or progress, or whatever term we may
prefer to use as the algebraic x to denote the
content of that undetermined resultant of human
endeavor toward which we look when we em-
ploy the concept destiny — the first division of the
problem of human life in the large, is religious.
Human life is conditioned by its relations
to a divine order and purpose. That
divine purpose must be investigated, and so far
as possible understood, in order to get the bear-
ings of human life. Then, without attempting to
put into Smith's theory details about which we
cannot get information, we have evidence
enough to show that, whether as a subordinate
section of religious relations, or as a jdivision
of relations somehow parallel with the religious
relations, there was an ethical division of life.
If we were to judge merely from the essay on
the moral sentiments, we should be left to the
impression that Smith's conception of ethics was
that it had to do merely with the theory of
appreciation or evaluation. We know, however,
that this psychological discussion represented
merely preliminaries which in his rnind led to the
doctrines of practical morals, and that the whole
plexus of moral attitudes with reference to which

ECONOMICS AND SOCIOLOGY OF LABOR 83

approbation or disapprobation is possible consti-
tuted in his mind a plane of human activities dis-
tinct from that which for him made up the
religious sphere. Then the third division of the
problem of understanding human life appeared
to Smith to be that which deals with the history
and theory of civic justice, the ways and means
of attempting to secure an approximation to the
principles of morals which ethics treats in the
abstract and in the individualistic phases. And,
finally, as all moral achievement has to get the
use of material bases and media, it was neces-
sary to work out a science of the ways and means
by which the necessary material conditions of all
spiritual achievement are to be secured. Thus
Smith's science of wealth had relatively the same
relation to his whole philosophy of life that the
technique of marine architecture has to our sys-
tems of commercial and admiralty and interna-
tional law. It was not a science of people in the
fulness of their lives. It was merely a science
of things and people considered as factors in pro-
ducing the material equipment of life.

I repeat that we are not at all bound to justify
Smith's classification. It is an entirely negligible
matter that his analysis of moral phenomena
would not now satisfy anyone. The main thing is
that he had a definite perception of the mediate,

84 ADAM SMITH AND MODERN SOCIOLOGY

and subordinate, and tributary status of wealth,
and that he betrayed relatively slight symptoms-
of the tendency, which was so strong in the
stereotyped classical theory, to assume that the
wealth factor is the sole arbiter of social rela-
tions. How to build a ship is one thing. How
to settle questions of equity between builders,
and owners, and officers, and crew, and shippers,
and passengers, and consignees, and other navi-
gators, and commercial interests of the nations
at large, is a very different thing. The former
is analogous with the questions which Smith di-
rectly raised in The Wealth of Nations. The
latter are suggestive analogues of the sort of
questions which he saw the need of raising in his
wider moral philosophy, and in spite of himself
indirectly raised in his economic discussion.^

We have to justify these propositions by a
rapid analysis of The Wealth of Nations itself.

Chapter I expounds the purely technical
theorem :

^ The Lectures on Justice, etc. (above, p. 59), contain
nothing that affects this summary. The treatment is wholly
historical and legal, in form and substance, except in Parts II
and III, which might be classed as economic rather than legal
or historical. At all events, the relation of the lectures to
antecedent moral philosophy does not appear to have been
unlike that of The Wealth of Nations, of which, as I said
ubove, the lectures are virtually a first draft.

ECONOMICS AND SOCIOLOGY OF LABOR 85

The greatest improvement in the productive powers of
labor, and the greater part of the skill, dexterity, and
judgment with which it is anywhere directed, or applied,
seem to have been the effects of the division of labour.

This is a proposition which is as far outside the
range of moral relations, as Smith thought of
them, as elementary theorems about the
increased efficiency of power applied by means of
wedge, pulley, screw, or lever.

Smith attribufes the increase of work which
division of labor makes possible to three fac-
tors: first, to the increase of dexterity in every
particular workman; second, to saving of time
usually lost in passing from one species of work
to another; third, to the invention of machines
which enable one man to do the work oi many.

Under the last head he introduces a considera-
tion which might be generalized beyond the form
in which he uses it ; viz. :

All the improvements in machinery, however, have by
no means been the inventions of those who had occasion
to use the machines. Many improvements have been
made by the ingenuity of the makers of the machines,
when to make them became the business of a peculiar
trade; and some by that of those who are called philoso-
phers or men of speculation, whose trade it is not to do
anything, but to observe everything, and who, upon that
account, are often capable of combining together the
powers of the most distant and dissimilar objects.'

»I. p. II.

86 ADAM SMITH AND MODERN SOCIOLOGY

Without restricting this factor to its value in
the invention of machinery, we may say that the
division of labor makes room for activities which
have increasingly remote relations to the produc-
tive process, and sets free types of action which
enrich life, whether or not they have a direct
influence upon processes of producing wealth.^

* Mallock, Aristocracy and Evottition (London, 1898),
opposes to what he is pleased to call sociology, on the one
hand, and to an equally questionable version of socialism, on
the other, a ponderous argument, drawn out through three
hundred and eighty pages, the substance of which is merely
a variation of this perception of the advantages of the division
of labor. The thread of wisdom that runs through the book is
entangled in a woeful snarl of irrelevance and inconsequence.
His generalizations about sociology fall flat among sociologists,
because he apparently bounds sociology by Herbert Spencer,
Edward Bellamy, Benjamin Kidd, and Sidney Webb ! His
account of socialism is equally provincial. The great-man
theory which he revises and recommends as a remedy for the
errors of both, easily boils down to the fact of the advantages
of specialization: This is all implicitly, and much of it
expressly, in The Wealth of Nations; it has been exhibited
much more voluminously by Tarde, although under the inade-
quate labels "imitation" and "invention ;" it has been general-
ized most correctly by my colleague, Professor W. I. Thomas,
in his interpretation "pace-making."

Mr. Mallock's volume is an ingeniously elaborated insinua-
tion that the world is shrouding itself in darkness through
failure to perceive that, of all specializers, the specializer in
money-making is pre-eminently entitled to its forbearance, its
admiration, and its fostering favor. The pathos of this appeal
so overstimulates the "impartial spectator's" sense of humor
that he is embarrassed in doing justice to the elements in the
book which deserve serious attention.

ECONOMICS AND SOCIOLOGY OF LABOR 87

The chapter contains a further theorem which
squints toward the bearing of economic factors
upon social structure ; viz. :

The separation of different trades and employments is
a consequence of the efficiency of the division of labour, and
is most extensive in the countries which enjoy the highest
degree of industry and improvement.'^

The concluding paragraphs of the chapter
constitute one of the classic passages in the litera-
ture of social description:

In the progress of society, philosophy or speculation
becomes, like every other employment, the principal or
sole trade and occupation of a particular class of citizens.
Like every other employment too, it is subdivided into a
great number of different branches, each of which affords
occupation to a peculiar tribe or class of philosophers ;
and this subdivision of employment in philosophy, as well
as in every other business, improves dexterity, and saves
time. Each individual becomes more expert in his own
peculiar branch, more work is done upon the whole, and
the quantity of science is considerably increased by it.

It is the great multiplication of the productions of all
the useful arts, in consequence of the division of labour,
which occasions, in a well-governed society, that uni-
versal opulence which extends itself to the lowest rank of
the people. Every workman has a great quantity of his
own work to dispose of beyond what he himself has occasion
for; and every other workman being exactly in the same
situation, he is enabled to exchange a great quantity of
his own goods for a great quantity, or, what comes to

» P. 7.

88 ADAM SMITH AND MODERN SOCIOLOGY

the same thing, for the price of a great quantity of theirs.
He supplies them abundantly with what they have occa-
sion for, and they accommodate him as amply with what
he has occasion for, and a general plenty diffuses itself
through all the different ranks of the society.

Observe the accommodation of the most common artifi-
cer or day-labourer in a civilized and thriving country,
and you will perceive that the number of people of whose
industry a part, though but a small part, has been employed
in procuring him this accommodation, exceeds all com-
putation. The woolen coat, for example, which covers
the day-labourer, as coarse and rough as it may appear, is
the produce of the joint labour of a great multitude of
workmen. The shepherd, the sorter of the wool, the wool-
comber or carder, the dyer, the scribbler, the spinner, the
weaver, the fuller, the dresser, with many others, must all
join their different arts in order to complete even this
homely production. How many merchants and carriers,
besides, must have been employed in transporting the ma-
terials from some of those workmen to others who often
live in a very distant part of the country! how much com-
merce and navigation in particular, how many ship-builders,
sailors, sail-makers, rope-makers, must have been employed
in order to bring together the different drugs made use
of by the dyer, which often come from the remotest
corners of the world ! What a variety of labour too is
necessary in order to produce the tools of the meanest
of these workmen ! To say nothing of such complicated
machines as the ship of the sailor, the mill of the fuller,
or even the loom of the weaver, let us consider only what
a variety of labour is requisite in order to form that very
simple machine, the shears with which the shepherd clips
the wool. The miner, the builder of the furnace for

ECONOMICS AND SOCIOLOGY OF LABOR 89

smelting the ore, the feller of the timber, the burner of the
charcoal to be made use of in the smelting-house, the brick-
maker, the bricklayer, the workmen who attend the fur-
nace, the millwright, the forger, the smith, must all of
them join their different arts in order to produce them.
Were we to examine, in the same manner, all the different
parts of his dress and household furniture, the coarse
linen shirt which he wears next his skin, the shoes which
cover his feet, the bed which he lies on, and all the dif-
ferent parts which compose it, the kitchen-grate at which
he prepares his victuals, the coals which he makes
use of for that purpose, dug from the bowels of
the earth, and brought to him perhaps by a long sea and a
long land carriage, all the other utensils of his kitchen, all
the furniture of his table, the knives and forks, the
earthen or pewter plates upon which he serves up and
divides his victuals, the different hands employed in pre-
paring his bread and his beer, the glass window which
lets in the heat and the light, and keeps out the wind and
the rain, with all the knowledge and art requisite for pre-
paring that beautiful and happy invention, without which
these northern parts of the world could scarcely have
afforded a very comfortable habitation, together with the
tools of all the different workmen employed in producing
those different conveniences ; if we examine, I say, all
these things, and consider what a variety of labour is
employed about each of them, we shall be sensible that
without the assistance and co-operation of many thou-
sands the very meanest person in a civilized country could
not be provided, even according to, what we may falsely
imagine, the easy and simple manner in which he is com-
monly accommodated. Compared, indeed, with the more
extravagant luxury of the great, his accommodation must

90 ADAM SMITH AND MODERN SOCIOLOGY

no doubt appear extremely simple and easy; and yet, it
may be true, perhaps, that the accommodation of an
European prince does not always so much exceed that of
an industrious and frugal peasant, as the accommodation
of the latter exceeds that of many an African King, the
absolute master of the lives and liberties of ten thou-
sand naked savages.®

In its primary purpose the first chapter of
The Wealth of Nations is no more an essay in
moral relations than an agricultural chemist's
statement of the reasons why the virgin soil of
the Canadian wheat area is more fertile than an
abandoned farm in New England. It has been
an effective stimulus of later inquiry into moral
relations, but it is immediately no more moral,
as Smith would use the term, than a comparison
of the vegetation of the temperate and torrid
zones.

In Chapter II Smith discusses "the principle
which gives occasion to the division of labour."
The thesis is as follows :

This division of labour, from which so many advan-
tages are derived, is not originally the effect of any human
wisdom, which foresees and intends that general opulence
to which it gives occasion. It is the necessary, though
very slow and gradual, consequence of a certain pro-
pensity in human nature which has in view no such ex-
tensive utility; the propensity to truck, barter, and ex-
change one thing for another.

•Pp. 11-13.

-ECONOMICS AND SOCIOLOGY OF LABOR 91

Of this proposition we may say, first, it is
methodologically an obiter dictum. That is, it
belongs in a larger range of inquiry, antecedent
and fundamental to the technological inquiry to
which The Wealth of Nations is devoted. It is,
moreover, a species of inquiry for which Smith's
scheme of moral philosophy apparently does not
provide a plane. It is related to the proper sub-
ject-matter of economics, as conceived by the
author of The Wealth of Nations, very much as
an inquiry into the ultimate physical reasons for
the relative durability of wood and steel would
be related to an engineer's account of the com-
parative economy of these materials, as discov-
ered by experience, for constructing railroad
bridges.

In the second place, the exact nature of the
question which Smith raises in this chapter is
primarily psychological, and secondarily socio-
psychological. It is therefore a fair index of
the closeness of relationship between the phe-
nomena of industry and the general phenomena
of individual and social consciousness. In this
connection Smith's work is a premonition of the
inevitable awakening of the sociological con-
sciousness with the unavoidable pursuit of in-
quiries (which may have started among economic
phenomena), out into all their relationships as
moral and psychical phenomena.

92 ADAM SMITH AND MODERN SOCIOLOGY

In the third place, the particular explanation
which Smith proposes is of a piece with the
mental philosophizings of his time, but it merely
applies a mouth-filling name to an unanalyzed
phenomenon. The "propensity to barter" is just
as much and just as little a distinct and ultimate
force in human affairs as a "propensity to swim,"
or a "propensity to jump over stone walls," or
a "propensity to go to the circus." If we fall
into the water, we try to swim, because we have
a preference for living. The same fact, appealed
to from another direction, stimulates us to make
the best of our ability to get over a wall if we are
chased by a bull. Certairi desires for nervous
stimulation find temporary satisfaction in the
circus, but a thousand alternative recourses may
serve the same purpose. That is, Smith scratched
the surface of psychological phenomena, which
have since his time furnished problems for more
exact psychology and sociology.

In the fourth place, w^e may observe that this
sort of explanation is not yet entirely discredited
even among rather prominent scholars. Som-
bart has thought it worth while to ridicule such
pseudo-explanation at some length.'''

In this same chapter Smith starts another line
of inquiry, which is also external to economic

■^ Moderne Kapitalismus, Vol. I, pp. xxv ff.

ECONOMICS AND SOCIOLOGY OF LABOR 93

technology, but, like the problem of psychical
motivation in general, it could not be ignored,
even at his preliminary stage of research. It is
strictly an essay in anthropology. The facts in
the case, quite independent of our apprehension
of them, are in their degree responsible for many
social differences, while more or less definite
theories about the facts are shaping both abstract
sociological doctrines and concrete social pro-
grams. He says :

The difference of natural talents in different men, is,
in reality, much less than we are aware of, and the very-
different genius which appears to distinguish men of dif-
ferent professions, when grown up to maturity, is not so
much the cause, as the effect of the division of labour.
The difference between the most dissimilar characters, be-
tween a philosopher and a common street porter, for ex-
ample, seems to arise not so much from nature, as from
habit, custom and education By nature a philoso-
pher is not in genius and in disposition half so different
from a street porter, as a mastiff is from a greyhound, or
a greyhound from a spaniel, or this last from a shep-
herd's dog.®

These propositions, taken by themselves, are
identical with clauses in the doctrines of nearly
all the modern revolutionary philosophers. They
are taken for granted by most of the extreme
socialists. The truth or error of the proposi-

«Pp. 16 f.

94 ADAM SMITH AND MODERN SOCIOLOGY

tions is not before us for discussion in this argu-
ment. The significant point is that Smith
instinctively perceived the close relation between
the technological problems of wealth, and the
anthropological and psychological and social
problems of people.

Chapter III elaborates the thesis that, "as it
is the power of exchanging that gives occasion
to the division of labour, so the extent of this di-
vision must always be limited to the extent of
that power, or, in other words, by the extent of
the market."

In one sense this proposition is strictly physi-
cal. It is no more to be disputed than the propo-
sition that the pressure of water at the bottom
of a tube is in proportion to the height of the
water in the tube.

On the other hand, Smith does not hint at the
broad scope of the question, What makes a
market? This is a sociological problem in the
most extensive sense. Its answer must come
from knowledge of the whole gamut and the
most refined combinations of human desires. Li I
Hung Chang is reported to have said that, if he
could persuade every man in China to add a
couple of inches to the length of his shirt-tail,
he could create a market for all the cotton grown
in America. The population of China is not

ECONOMICS AND SOCIOLOGY OF LABOR 95

necessarily a market for American cotton. By a
decree of the imperial government, if Great
Britain could be induced to acquiesce, China
might cease to be a market for opium, etc., etc.
While, therefore, this chapter contains a very
important principle of economic technology, it
leaves untouched the much more important so-
ciological question of the origin and variation of
markets.

The chapter closes with a pertinent political
application of the principle. It is a typical in-
stance of the power of artificial social arrange-
ments, in this case the territorial jurisdiction of
states, to modify the economic work of natural
conditions ; viz. :

The commerce besides which any nation can carry on by
means of a river which does not break itself into any
great number of branches or canals, and which runs into
another territory before it reaches the sea, can never be
considerable; because it is always in the power of the
nations who possess that other territory to obstruct the
communication between the upper country and the sea.
The navigation of the Danube is of very little use to the
different states of Bavaria, Austria and Hungary, in com-
parison of what it would be if any of them possessed the
whole of its course till it falls into the Black Sea.

Chapter IV, on "The Origin and Use of
Money as a Medium of Exchange," does not
probe farther into the sociology and psychology

96 ADAM SMITH AND MODERN SOCIOLOGY

of money than is necessary for immediate ex-
planation of the obvious phenomena of exchange.
It therefore has the same relation to ultimate so-
ciology and psychology that a mechanic's expla-
nation of the advantages of lubricating oils
would have to physics and chemistry. The chapter
contains illustrations in abundance of the psycho-
logical nature of the forces that have originated
and modified the use of money through varied
estimates of convenience. The point of view,
however, is exclusively that of the technique of
the economic cycle — production, exchange, divi-
sion of labor, widening of the market, more
production, more division of labor, more widen-
ing of the market, etc., etc.

At the close of the chapter the author enters
upon that thus far unbounded sea of troubles,
the theory of value.

We discover at a glance, in the light of the
economic discussion of nearly a century, that
Smith's treatment of the subject was on a
relatively superficial plane. That is, he was dis-
cussing the technique, not the psychology, nor
the logic, nor the sociology, of money. This
appears at once in his forms of expression ; e. g. :

What are the rules [sic] which men naturally observe
in exchanging them [goods] either for money or for one
another, I shall now proceed to examine. Three rules

ECONOMICS AND SOCIOLOGY OF LABOR 97

[sic] determine what shall be called the relative or ex-
changeable value of goods.

The word value, it is to be observed, has two different
meanings, and sometimes expresses the utility of some
particular object, and sometimes the power of purchasing
other goods which the possession of that object conveys.
The one may be called "value in use/' the other, "value in
exchange." .... In order to investigate the principles
which regulate the exchangeable value of commodities,
I shall endeavour to show, first, what is the real measure
of this exchangeable value; or wherein consists the real
price of all commodities; secondly, what are the different
parts of which this real price is composed, or made up;
and lastly, what are the different circumstances which
sometimes raise some or all of these different parts of
price above, and sometimes sink them below their natural
or ordinary rate; or what are the causes which sometimes
hinder the market price, that is, the actual price of com-
modities from coinciding exactly with what may be called
their natural price.®

Three chapters follow, on the subjects thus
proposed. It is easy to point out, at this late day,
that we open up the whole unknown world of the
psychology and sociology of value when we begin
to observe that some tribes will exchange their
goods for wampum, and some for paper promises
to pay, and some for gold only. It is easy to find
in Adam Smith's discussion the points at which
paths lead farther into the by-ways of these
subjects than he felt impelled to pry. As a mat-

• Pp. 28, 29.

98 ADAM SMITH AND MODERN SOCIOLOGY

ter of fact, however, we have to follow the whole
nineteenth-century history of economic theory,
up to the point where we find John Stuart Mill
declaring that the theory of value had been
settled, and then through another generation,
which encounters more difficulties than ever in the
theory of value — we have to review this whole
evolution, to be aware of the full measure of
difference between the technological treatment of
value in The Wealth of Nations, and the prob-
lems that present themselves to modern philoso-
phers when they attempt to formulate the
phenomena of money and of value in terms of
their ultimate relations.

At the same time, one might easily mistake
the first paragraph of the fifth chapter for a
royal road, instead of an untrodden path, into the
broadest realms of social philosophy. If one did
not know the sequel, one might with good
reason surmise that an earlier Karl Marx had
been discovered. In this paragraph Smith is cer-
tainly nearer to the fundamental theorem of
Marx than to the major premises of economic
theory and practice at the present time, at least
in England and the United States. The para-
graph reads as follows :

Every man is rich or poor according to the degree in
which he can afford to enjoy the necessaries, conven-

ECONOMICS AND SOCIOLOGY OF LABOR 99

iences, and amusements of human life. But after the di-
vision of labour has once thoroughly taken place, it is by
the very small part of these with which a man's own
labour can supply him. The far greater part of them he
must derive from the labour of other people, and he
must be rich or poor according to the quantity of that
labour which he can command, or which he can afford to
purchase. The value of any commodity, therefore, to
the person who possesses it, and who means not to use or
consume it himself, but to exchange it for other commodi-
ties, is equal to the quantity of labour which it enables him
to purchase or command. Labour, therefore, is the real
measure of the exchangeable value of all commodities.*"

We shall have occasion to observe presently
how Smith restrained himself from follovs^ing
this clue in the direction w^hich Marx afterv^ard
took. We may notice, in passing, that, although
Smith very distinctly reiterated the same theorem
when discussing the wages of labor (Chap.
VIII), he approached it as an explanation of the
problem of value in general and of price in par-
ticular. It did not occur to him as a class ques-
tion at all. He was in the course of explaining
the mechanism of civilized exchanges, and his as-
sumption was that the mechanism was working
normally. He was not searching for a clue to a
situation which he considered abnormal. Prac-

^^ Cf. Chap. VI, 4th paragraph, p. 48 ; also p. 50, 2d para-
graph.

loo ADAM SMITH AND MODERN SOCIOLOGY

tically no grievances were alleged against the
essential structure of the economic system. Such
charges as were brought against social arrange-
ments at this time were principally political in
form, whatever might have been their implicit
economic content. The antithesis of labor and
capital, as social categories, was at that time
virtually unknown. Labor and capital were
purely economic categories, and could be treated
as abstractions, whether on the debit or credit
side of the reckoning, without provoking class
prejudice. Precisely the opposite was the case
when Marx wrote, and this was at all events
an important factor in deciding that in Marx's
hands a labor theory of value became directly a
class issue instead of a mere technical distinction.
Then we must make note of another effect
upon Smith's mind of the presumption that the
system which he tried to explain was operating
normally. That is, he was phenomenally uncon-
scious, as it appears after a century of closer
analysis, that commonplace, everyday exchanges
could not be accounted for by his extremely
naive theory of price. It would be easy for us
to make an a-priori argument to the effect that
a man so wise as he could not possibly have over-
looked, as he did, some of the plain gaps between
the facts and his explanation; but the reason is

ECONOMICS AND SOCIOLOGY OF LABOR loi

evidently to be found in his disregard of the arti-
ficial and arbitrary social arrangements by which
civilization complicates the simple order of human
actions. In other words, when he attempted to
explain the phenomena of price, his logical pro-
cess seems to have been, first, a generalization of
the simplest conceivable exchanges of the prod-
ucts of labor into the type of all exchanges.
Then, instead of using that generalization merely
as a search hypothesis — i. e., to guide a complete
induction — he used it as a principle for explain-
ing all exchanges deductively. Of course, this
amounts logically to begging the question with
respect to every case of exchange which is not
used as a means of testing the generalization.
That is, such a principle once adopted for such
use is a blind leader of the blind. It glosses over
the facts instead of exposing them.^^

When Smith says, for instance, "Labour was
the first price, the original purchase money that
was paid for all things," ^^ he overpersuades him-
self, more than he is aware, that the same is true
in the same degree in all purchases. For
our present purpose it is enough to point
out that the result was an intolerable vagueness

" This would be an instance, therefore, illustrating the
fault which Bagehot charges to Adam Smith. Cf. above, p. 68.

" P. 30.

I02 ADAM SMITH AND MODERN SOCIOLOGY

and approximateness in his theory of exchanges.
Thus he says: ^^

The real price of everything, what everything really
costs to the man who wants to acquire it, is the toil and
trouble of acquiring it. What everything is really worth
to the man who has acquired it, and who wants to dis-
pose of it or exchange it for something else, is the toil and
trouble which it can save to himself, and which it can
impose upon other people."

It is by no means clear precisely what Smith
meant by these propositions, but any version that
might be proposed would be ruled out, as an ade-
quate formula of exchanges, by types of cases
which could not be so explained. This, how-
ever, has been the theme of a voluminous
economic literature for nearly a century. Our
argument does not call for an examination of the
progress of analysis on this point. We may
simply note, by way of illustration, that no
formulation of the mere mechanism of economic
exchanges can possibly express the essential facts
of value and price. These are phenomena re-
sulting from more than one variable. They are
psychical and social as well as mechanical. There

" Ibid.

" I refrain from turning any light from the "marginal
utility theory" upon Smith. According to the outline of analy-
sis of which this essay is a detail, that development must be
noticed in its chronological order.

ECONOMICS AND SOCIOLOGY OF LABOR 103

is probably a certain minute portion of the "toil
and trouble" element in every case of value, but
whether it is the "toil and trouble" which it
actually costs the producer to produce it, or the
"toil and trouble" which it would cost
the purchaser to produce it, or the "toil
and trouble" to which the purchaser would
be liable if he had to go without it, actual ex-
changes in civilized society could not be expressed
uniformly in terms of either concept. "Toil and
trouble" as an equivalent for the term "labor
expended in production" can in very few cases
be an equally approximate measure of the reason
why the seller sells and why the buyer buys.
Value or price sometimes has one ratio to the
labor-cost of production or of reproduction, and
sometimes a quite different ratio. These familiar
considerations may be summed up in the plati-
tude: Price or value is a phenomenon of two
chief variables; viz., first, the conditions govern-
ing the supply, and, second, the conditions gov-
erning appreciation as a factor of demand.^ ^

In a word, Smith's attempt at an explanation
of price and value credited labor-cost with too

" Cf. Simmel, "A Chapter in the Philosophy of Value,"
American Journal of Sociology, Vol. V, p. 577. For further
concrete illustrations of the lack of precision in Smith's labor
theory of value, see Bagehot, Economic Studies, pp. 121 flF.

I04 ADAM SMITH AND MODERN SOCIOLOGY

exclusive significance; or, to express the same
thing from the other point of view, it failed to
make due allowance for the subjective and
social factors in value and price. All this has
meanwhile been made evident by the economists
themselves, though it is equally evident that the
last word has not been said, and that the psy-
chologists and sociologists have a function in
tracing the facts to their ultimate elements.

When Smith touches upon the relation of
wealth to anything beyond the immediate techni-
calities of economic processes, his propositions
affect the modern reader as relatively less appli-
cable to the real world of today than they were
to his own time.^^ They are approximations to
truth, but the approach was so much closer
when he wrote, that, under the operation of
present conditions, some of the paragraphs, when
applied to our world, read almost like satire.
For example, in immediate connection with the
sentences just quoted, he continues:

Wealth, as Mr. Hobbes says, is power. But the person
who either acquires or succeeds to a great fortune does
not necessarily acquire or succeed to any political power,
either civil or military. His fortune may, perhaps, afford
him the means of acquiring both, but the mere possession
of that fortune does not necessarily convey to him either.

^' Again strengthening Bagehot's indictment. See above,
p. 68.

ECONOMICS AND SOCIOLOGY OF LABOR 105

The power which that possession immediately and directly
conveys to him, is the power of purchasing; a certain
command over all the labour, or over all the produce of
labour which is then in the market. His fortune is greater
or less, precisely in proportion to the extent of his
power; or to the quantity either of other men's labour,
or, what is the same thing, of the produce of other men's
labour, which it enables him to purchase or command.
The exchangeable value of everything must always be
precisely equal to the extent of this power which it con-
veys to its owner."

At first glance we are tempted to say that all
this is literally true. Upon second thought we
are impelled to add that it is true only with heavy
emphasis upon the adverbs "necessarily," "im-
mediately," "directly," etc. Upon reconsidera-
tion of the second thought, we conclude that
even with this proviso the propositions are far
from adequate.

In the first place, the possession of wealth in
large quantities, in our modern world, almost
of necessity commits the owner to participation
in affairs, for the sake of preserving, if not of
increasing, his wealth, to an extent that adds to
his political or social influence in ways which
could not be achieved by his bare personality.
In the second place, it is not true that the total
power over men exerted by a syndicate control-
ling a hundred million dollars is merely equal to

"P. 31.

io6 ADAM SMITH AND MODERN SOCIOLOGY

the sum of the powers exerted by a million
detached men, each controlling one hundred dol-
lars.^ ^ Through the single factor of suggesti-
bility, to take but a single instance, massed
wealth becomes a social force which the logic of
the labor necessary to produce or to reproduce
it utterly fails to explain. Similar factors might
be scheduled in large numbers.^ ^

Smith advances from his premises of labor
as the ultimate norm of value, to money as the
representative of labor in the work of measuring
value in actual exchanges. Thus :

But though labour be the real measure of the ex-
changeable value of all commodities, it is not that by

which their value is commonly estimated It is more

natural, therefore, to estimate its exchangeable value by
the quantity of some other commodity than by that of the
labour which it purchases. .... But when barter ceases,
and money has become the common instrument of com-
merce, every particular commodity is more frequently
exchanged for money than for any other commodity.^

" If it were, there would be no more sense in public atten-
tion to the few men who form a trust, than in the same sort
of public attention to the unorganized men in a given popula-
tion whose combined wealth would equal the capital of that
trust.

" Cf. the case cited at the beginning of The Wealth of
Nations, Chap. VI, p. 47. Such trade is not a measure of
comparative quantities of labor at all, but, on one side at least,
almost purely of childish desire for novelties.

^Pp. 31, Z2.

ECONOMICS AND SOCIOLOGY OF LABOR 107

With this the argument becomes more strictly
technical, from the purely commercial point of
view, and it thus passes out of the range of our
present inquiry.

In Chapter VI, on "The Component Parts of
Commodities," we come upon a turn of the argu-
ment which it is by no means easy to understand
or to appraise. The first reason for this is that
we cannot be sure how clearly Smith drew the
distinction between what is and what ought to be
in the processes of industry. That is, it is by no
means certain that he always confined himself to
bare analysis of the occurrences in commerce,
and we are not always able to tell when he
wanted to be understood as merely formulating
the facts, and when he adds to the facts his own
appraisals.

For instance, speaking of labor, in an ''ad-
vanced state of society," he says : "In this state
of things, the whole produce of labour does not
always belong to the labourer." ^i As a bald
statement of fact, this is literally true. Does
Smith, or does he not, mean to imply that the
extent to which it is true is strictly in accordance
with equity? We can answer this question only
vaguely. Smith certainly had no thought of any
suf^h radical injustice as Marx afterward
" P. so.

lo8 ADAM SMITH AND MODERN SOCIOLOGY

alleged in this connection. It is not certain that he
would assert that there was any injustice at all in
the system of distribution operated by the society
of his day. This in spite of the fact that in
certain concrete cases, like those of the colliers
or the salters, he protested against abuses. He
had not generalized such items into an indict-
ment against the industrial system at large. Ap-
parently he assumed that the more complicated
system of production, consequent upon division
of labor, automatically invented a corresponding
system of distribution, in which the reward of
each participant in production was assigned in
strict ratio with the value of his labor in creating
the product. Whether he would have asserted
precisely this or not, if the question had been
distinctly proposed, it is evident that in his mind
there was not yet a problem of distribution which
was not settled in advance by the technique of
production. In the paragraph from which the
last quotation was made Smith goes on to say:

Neither is the quantity of labour commonly employed
in acquiring or producing any commodity the only cir-
cumstance which can regulate the quantity which it
ought commonly to purchase, command or exchange for.
And additional quantity, it is evident, must be due for the
profits of the stock which advanced wages and furnished
the materials of that labour.

We mav not be able to divest our minds of

ECONOMICS AND SOCIOLOGY OF LABOR 109

associations formed by study of the economic
literature since Adam Smith. We may do our
best, however, to judge him for a moment, in
the cold light of abstract logic, without reference
to disturbing interests. We may claim to be
attempting at least to think judicially when we
call attention to a significant anomaly in this con-
fident assertion. Is it not remarkable that, so
soon after declaring labor to be "the real meas-
ure of the exchangeable value of all commodi-
ties," ^^ Smith should feel at liberty to take for
granted that profits are as evidently due
to the capitalist as wages are to the laborer?
To be sure, Smith has not in so many
words said that labor is the only source of
wealth. He has merely said that labor is the
only real measure of wealth. At the same time,
his language conveys the impression that in his
mind the concepts "source" and "measure" were
so associated that they amounted to the same
thing. He said, a few pages later: "Wages,
profit, and rent are the three principal sources
of all revenue, as well as of all exchangeable
value." 2^ Again he remarks : "As in a civilized
country there are but few commodities of which
the exchangeable value arises from labour
only "»4

=« Chap. V, p. 30. ^ p. 53. " p. 54.

no ADAM SMITH AND MODERN SOCIOLOGY

In Smith's mind the claim of capital to profits
appeared as evident and immediate as the claim
of labor to its wage. Not quite three-quarters
of a century later, Marx launched his system of
social philosophy centered about absolute denial
of the claim of capital to profits.^^ Yet, as we
have seen, the two men seem to have held nearly
identical views of labor as the ultimate measure
of right to wealth. How shall we account for
the evolution of the classical political economy
and Marxian socialism from so nearly identical
conceptions of the relation of labor to wealth?

The truth probably is that Smith's views never
actually approaclied quite so near to the major
premise of Marx's system as would appear from
the things which Smith left unsaid, or from the
partially uncritical form of the things which he
actually said. Judged by himself in other con-
nections, as, for example, the propositions last
cited, and Chapter IX, "Of the Profits of Stock,"
Smith never entertained a doubt that the pay-
ment of profits to capital is as strictly and funda-
mentally consistent with the natural order of
things as the payment of wages to labor.
Whether this state of things represented an unde-
tected contradiction in Smith's mind, or whether

^ I am referring, of course, to the Communist Manifesto,
not to Capital.

ECONOMICS AND SOCIOLOGY OF LABOR m

it was merely an accident of incomplete formula-
tion of his views, may never be decided. This
much is obvious: If Adam Smith had intro-
duced into economic theory a searching critique
of the basis of the claims of capital to profits,
Marx's economic doctrine would in all probabil-
ity never have put in an appearance. If it had
appeared, it could hardly, under the supposed
circumstances, have been fathered by a man of
Marx's intellectual power. If justice and only
justice had meanwhile been done both to capi-
tal and to labor, in the way of working out a
valid theory of when and why and in what
proportion each deserves a share of the surplus
product, Marx might still have become a social-
ist, but his socialism would certainly have had a
different point of detachment from orthodox
economic theory.

Profits, as the man on the street uses the
word, is a blanket term which may include ele-
ments as heterogeneous as wages and graft and
loot. To some of these elements one capital-
ist has as clear a title as the laborer has to his
wage. To others of these elements another capi-
talist has no more title in equity than the bank-
breaker has to his stealings. Smith did not feel
the necessity of a critique of the title of capital to
profits, because his attention was turned in the

112 ADAM SMITH AND MODERN SOCIOLOGY

direction of the productive activities of capital-
ists, and their consequent title to their
reward. Marx was intensely impressed by
the political and commercial usurpations
which sanctioned arbitrary claims of masters
and denied some of the natural claims of
workmen. In Marx's time it was becoming
necessary to recognize the class cleavage between
capitalists and laborers. The contrasts between
their situations were so sharp that it was as easy
for Marx to assume that the capitalist is not a
laborer, and consequently not entitled to a wage
in the form of profits, or otherwise, as it was
three-quarters of a century earlier for Smith to
assume that the capitalist is a laborer, and there-
fore entitled to a wage in the form of profits.^*^
Unconsciously, and doubtless with equal intention
to represent things as they are, both Smith and
Marx started a fashion of pinning economic

^^ It is not true, and I do not assert, that Marx utterly
overlooked the industrial function of the capitalist. He ad-
mitted it, but then he obscured it in such a way that it has
been easy for his followers to ignore it, while supposing that
they were following his teachings. Using the names of Smith
and Marx to label tendencies for which they were partly
responsible, I point out the mistaken assumptions of the tend-
encies, while I am aware that neither Smith nor Marx is
justly to be charged with deliberately promulgating the extreme
errors to which their theories have lent force.

ECONOMICS AND SOCIOLOGY OF LABOR 113

faith to a false universal. In the former case it
was, "Every capitalist deserves profits." In the
latter case it was, **No capitalist deserves profits."
For purposes of analysis we may separate the
logical from the moral elements in modern
social theory and practice. Speaking, then, of
the logical phase only, we may say that the phe-
nomenon of Marxian socialism is merely, in
Hegelian terms, the inevitable extreme antithesis
of Smith's extreme thesis, and that inevitable
criticism is now ascertaining the elements of
truth in both false universals, and combining
them in a synthesis that shall more closely
approach a true universal.

yin other words, the classical political economy
asked the world to take for granted, and make
permanent, certain accidental differences between
individuals and classes. Presently the degree to
which these differences had established them-
selves presented anomalies which provoked the
socialist protest in terms which not only
denounced the anomalies, but justified the con-
tention on grounds that at once presented corre-
sponding anomalies. In so far, then, as the
classical political economy and Marxian socialism
are merely logical incongruities, the issue
between them may be reduced to a single prob-
lem : to discover the direct line of truth between

114 ADAM SMITH AND MODERN SOCIOLOGY

the two tangents, ''Every capitalist deserves
profits," and ''No capitalist deserves profits."

Although this problem has confronted
students of society rather definitely for more
than a half-century, and although it is difficult
for us to understand how a man of Adam
Smith's acumen could have been so near to it
without discovering the need of undertaking a
solution, it is still uncertain whether the time is
ripe for securing an unprejudiced hearing for
the purely abstract problem. Vested interests
and contesting interests are too much concerned
about the immediate applications of the possible
answer to the question. It is hard to discuss it
without incurring suspicion of partisanship on the
one side or the other. Yet there is no question
of abstract principle in the whole realm of social
science which deserves more immediate attention.
Nothing could more directly relieve the present
tension between economic classes than the dem-
onstration of a valid generalization, and the
acquiescence of all concerned in the generaliza-
tion, as a substitute for the present friction
between the two fallacies just noted.

Having pointed out that Smith does not hunt
down the ultimate justification for profits, but
merely goes back far enough to assert that capi-
tal would not be employed if profits did not

ECONOMICS AND SOCIOLOGY OF LABOR 115

accrue, we need not attend further to this step
in the argument.^''^

Smith takes matters as he finds them, and,
quite in the spirit of routine bookkeeping, charges
up profits as one of the items of the cost of com-
modities. To be as specific as possible, he denies
that profits are a species of wage, and concludes
that "the profits of stock constitute a component
part altogether different from the wages of

" It would be quite in order, however, to take this early
occasion for challenging the universality of Smith's generaliza-
tion, which has done yeoman's service throughout the period
of classical economics. In the great majority of cases, as the
world now goes, men would seek for safe ways to hoard their
wealth, if they could not get profits from investments. Of
course, I am now using the term "profits" in the loose sense
which includes interest. How much of this disposition would
yield to other motives, if conditions were changed in quite
thinkable ways, we need not try to decide. We find the
actual tendency, however, to put security above income in the
case of vast aggregates of wealth today. Moreover, men some-
times prefer to capitalize some of their wealth in economically
non-productive improvements — architecture and other fine arts,
museums, endowment of teaching, research of all kinds, explo-
ration, experimentation in countless lines, etc., etc. That is,
the motive of acquisition is sometimes overborne by non-
acquisitive motives. Even in case the desire of gain is upper-
most, it is not difficult to imagine changes in legal regulations
which would make investment with no other return than gov-
ernmental guarantee of the security of the principal, prefer-
able in many cases to the alternative of personal labor by the
owner in making his capital productive. In other words, the
principle that men will not invest their money without pros-

Ii6 ADAM SMITH AND MODERN SOCIOLOGY

labour, and regulated by quite different
principles." ^^

Labor, then, being the first element in the
price of commodities, and profits the second,
Smith enters as the third element in the schedule
the item of rent :

In every society the price of every commodity finally
resolves itself into some one or other, or all of those three
parts; and in every improved society all the three enter
more or less, as component parts, into the price of the
far greater part of commodities.*

The question whether or not rent is a part of
price was not allowed to stand as settled by

pective profits is unquestionable common-sense for everyday
use. It would be absurd to calculate upon any other pre-
sumption for immediate practical purposes. At the same time,
the principle has no such finality as has usually been claimed
for it. It is subject to variations even to the degree of entire
suspension. Before psychology and sociology have their final
reckoning with economics, the supposition that the prospect of
profits is an inexorable precondition of the employment of
capital will be extensively qualified. The fact that it has
usually passed as final is an incident of the essentially tech-
nological character of classical economics. It is enough merely
to mention here that this item in the account between tech-
nology and philosophy is still unsettled.

^ P. so. Here again Smith seems to be declaring not only
what is, but what in his opinion should be ; thus indicating
that he was unconscious of a debatable issue at the point where
Marx made his first assault.

''Pp. 50, 51.

ECONOMICS AND SOCIOLOGY OF LABOR it?

Smith's dictum, but we may regard it as falling
so exclusively within the limits of economic tech-
nology that we need not deal with it in the
present study.

Without attempting even to indicate the possi-
bilities of adding to Smith's theory of price by
observing the extra-economic social factors which
are more or less frequent variations of the princi-
pal factors, it may be suggested, in passing, that
premium, bonus, prize, stimulus, has been in
many cases an important element in prices, espe-
cially in recent times. Whether this element has
been introduced wisely or unwisely is not in
question. The element is there. Every patented
or copyrighted article commands a higher price
than . it would without legal reinforcement
of its purely economic claims, and that incre-
ment is the contribution which society pays to
spur the individual to effort. It is not always,
but often, more than the market value of his
labor, if the other elements of price were alone
considered. A considerable fraction of the price .
of tariff-protected articles must be charged up
to this item. Another element of price, which ^
amounts to much more in our day than in Adam
Smith's time, may be scheduled as the cost of •
creating the market. Everything which may be
put under the general head "advertising" is

Ii8 ADAM SMITH AND MODERN SOCIOLOGY

referred to in this connection. Whether such
items as these are of sufficient importance to cut
much figure in economic theory, they are signifi-
cant indexes of the constant fact that economic
processes are always carried on in a larger social
medium, and are more or less modified by
influences that are external to the economic
process itself.

In this same chapter there is incidentally a
confession of the naive view which Smith held of
interest. The revenue derived from stock
by the person who does not employ it himself, but lends it
to another, is called the interest or the use of money.
It is the compensation which the borrower pays to the
lender for the profit which he has an opportunity of mak-
ing by the use of money. Part of that profit naturally
belongs to the borrower who runs the risk and takes
the trouble of employing it; and part to the lender, who
affords him the opportunity of making this profit.^"

Whatever is to be said from the sociological
point of view about the theory of interest may
be reserved for application to a maturer form of
the economic statement.

At the close of this sixth chapter Smith recurs
to an item in the general calculation to which he
had already alluded. He says : ^*

If the society were annually to employ all the labour
which it [the annual produce] can annually purchase, as

^ P. 53. Cf. pp. 127-31; 174, 175, below. '^P. 56.

ECONOMICS AND SOCIOLOGY OF LABOR 119

the quantity of labour would increase greatly every year,
so the produce of every succeeding year would be of
vastly greater value than that of the foregoing. But there
is no country in which the whole annual produce is em-
ployed in maintaining the industrious. The idle every-
where consume a great part of it; and according to the
different proportions in which it is annually divided be-
tween those two different orders of people, its ordinary
or average value must either annually increase or dimin-
ish, or continue the same from one year to another.

This again is a perception which carries social
implications far in excess of its meanng for mere
economic technique. They have not yet been
carefully developed, and they have consequently
not been sanely apphed to theories of social
progress. They have been obscured by all the
economic emphases which have been impelled
by an interest to make it appear that the word of
economic technology should be the final word in
social discussion. We shall have occasion to
recall this passage when we come to analyze the
latest phases of democratic theory.

The deeper we get into the current of Smith's
argument, the more difficult it is (not simply to
distinguish between factors which are primarily
technological on the one hand, and primarily
sociological on the other, but) to resist the
temptation to abandon our purpose to deal
exclusively with the sociological factors. Since

I20 ADAM SMITH AND MODERN SOCIOLOGY

every economic process has relations sooner or
later with all the other social processes, the con-
creteness of the economic picture which Smith
almost invariably presents is a stimulus which
almost irresistibly prompts the sociologist to
accept it as a challenge to trace out the extra-eco-
nomic social elements in the phenomena, even
when the technical elements are obviously para-
mount from the point of view of the author's
inquiries.

The next following five chapters (VII-XI),on
the general subject of the factors entering into
the price of commodities, might furnish texts for
many times that number of chapters on the social
variants of "natural" and "market" price. If
we should enter upon a subject of this sort, how-
ever, it should be with the latest economic formu-
las as the brief in view of which we should draw
up our own plea. It would introduce unneces-
sary confusion if we should attempt to restate in
sociological terms all of Smith's propositions
about price. In the first place, they are primarily
technological , not sociological. In the second place,
they appear in present economic theory with
much revision, so that to a considerable extent
we should be wasting our strength trying to do
over again much that the economists have mean-
while done, if we tried to restate Smith's doc-

ECONOMICS AND SOCIOLOGY OF LABOR 121

trines in detail. Our cue at this point, therefore,
is, first, to note that the argument now becomes
relatively technical, with the extra-economic fac-
tors relatively negligible ; second, that at the out-
set of this technical inquiry a prime sociological
question is waived, and that this sociological
question is ever present with us when we face our
practical problems of correlating our economic
systems with the remainder of our institutions.
We must make this last statement more explicit.
At the beginning of Chapter VII Smith intro-
duces the distinction between "natural" price
and "market" price. He says:

There is in every society or neighbourhood an ordinary
or average rate both of wages and profit in every different
employment of labour and stock. This rate is naturally
regulated, as I shall show hereafter, partly by the general
circumstances of the society [sic], their riches or pov-
erty, their advancing, stationary or declining condition;
and partly by the particular nature of each employment.

There is likewise in every society or neighbourhood an
ordinary or average rate of rent, which is regulated
too, as I shall show hereafter, partly by the general
circumstances [sic] of the society or neighbourhood in
which the land is situated, and partly by the natural or
improved fertility of the land.

These ordinary or average rates may be called the
natural rates of wages, profit, and rent, at the time and
place in which they commonly prevail.

When the price of any commodity is neither more nor

122 ADAM SMITH AND MODERN SOCIOLOGY

less than what is sufficient to pay the rent of the land, the
wages of the labourer and the profits of the stock em-
ployed in raising, preparing and bringing it to market,
according to their natural rates, the commodity is then
sold for what may be called its natural price.

The commodity is then sold precisely for what it is
worth, or for what it really costs the person who brings it
to market

The actual price at which any commodity is commonly
sold is called its market price. It may either be above, or
below, or exactly the same with natural price.^^

As a rough and ready formal division, the
distinction is of course perfectly familiar and
obvious and necessary. When we attempt to
apply it to a concrete case of price in a modern
community, however, we encounter a difficulty,
not with the formal principle of division, but with
questions of fact which should determine the
application of the principle. Perhaps the essence
of the matter may be suggested by a mere verbal
correction. If we substitute for the phrase
"natural price" the term "customary price," we
at once raise the question whether there is a dif-
ference between the two concepts. If we think
the question through, there is little room for
doubt that Smith's phrase harbors a fundamental
fallacy. The "customary," in price as in other
things, may be far from the "natural," if we

'' Pp. 55, 56.

ECONOMICS AND SOCIOLOGY OF LABOR 123

mean by ''natural" that which is most nearly in
accord wtih the permanent or essential nature of
things. For instance, suppose a community has
for a generation been paying for its illuminating
gas a price which includes a profit on watered
stock equal to two or three times the market
rates of interest on the actual capital invested.
If we adopt the contention of the gas company
that it is entirely within its rights in watering
its stock and in treating the fictitious investment
as though it were real, then it would make no
difference whether we used the phrase "natural"
or "customary" price. In other words, so soon
as prices, whether in the element of rent, or
profits, or wages, come to be in question on
grounds of equity, it makes all the difference in
the world with our decision how much of the
variable and arbitrary "general circumstances of
the society" we assume to be natural and neces-
sary, and so inflexible factors of price.

All the mooted social questions of today over
economic claims of various classes are to a,
greater or less degree contests over the claim
that vested or customary rights are natural
rights. There is never a question between de-
mocracy and privilege, especially if the privilege
has actually been exercised, in which it is not
contended, openly or tacitly, on the side of the

J 24 ADAM SMITH AND MODERN SOCIOLOGY

privilege, that the privilege is in accordance with
the eternal nature of things. At this moment
the extreme "stand-patters" on the subject of the
American tariff do their best to make their fel-
low-citizens believe that the bonus which the law
gives them is a price which they have as natural
a right to collect of the consumer as the laborer
has to collect his hire. The men who have fixed
railroad rates in the past want perpetual freedom
to make rates without governmental control, and
they claim that such freedom is "natural," while
governmental control is unnatural.

That is, all the conventionalities which fix the
standard of living in a given community may for
a long time be taken for granted, and accord-
ingly the wage of unskilled labor may be less for
a month in Russia than the wages for the same
class of labor may be for an eight-hour day in
some parts of the United States. The Russian
employer and the American employee could not
be brought to an agreement as to which of these
rates of wages, if either, represented the "natural"
price of labor. So far as the bookkeeping of a
particular industry is concerned, or the condi-
tions of competition in a given market, custom-
ary price may be treated as "natural" price. But
the moment price becomes a moral question, by
being brought into the arena of conflict between

ECONOMICS AND SOCIOLOGY OF LABOR 125

groups with antagonistic interests in distribution,
then the previous question is always in order;
viz. : How much of customary market valuation
is not natural but unnatural? To what extent
have the conventionalities of society interfered
with the natural equilibration of the claims of
all the members of society?

Again we must remind ourselves that at
Adam Smith's time there was a minimum of
occasion for imagining that there could or should
ever be any considerable modification in the laws
of property in Great Britain. British institu-
tions, on their strictly economic side at least,
as distinguished from the politico-economic
phases as involved in such a question as restricted
or free foreign trade, must have seemed to Smith
nearly as firmly settled as the rock-bound coasts
of the kingdom. It cost him no stretch of the
imagination, no stultification of mind or con-
science, to assume that the customary social
stratification, from landed gentlemen to navvy,
was in rough correspondence with natural law.
In the middle of the nineteenth century, on the
contrary, especially in Germany, doubts had
already disturbed such sunny satisfaction. To-
day the operation of the same principles which
Smith took for granted produces anomalies
which no judicially minded person can overlook.

126 ADAM SMITH AND MODERN SOCIOLOGY

We have come to understand that there are really
three categories of price, instead of two. We
may call these "customary price," ''market price,"
and "normal price." The last phrase means just
what the words might have meant to Adam
Smith, minus the implication that the third and
the first categories necessarily correspond.
Everyone who perceives that the last valuation
of everything in this world must be in terms of
people, not in terms of commodities, is beginning
to draw the inference that there is always an
open question whether the current scale of prices
takes sufficient account of human values to
approach as near as possible to normal prices.

I am not at all sure that socialists of the
Marxian or any other type are really nearer in
sympathy than Adam Smith was to the practical
application of the human measure of value. So-
cialism seems to be, in fact, in the aggregate, less
a contention for application of deeper moral
principles, than a contention for admission of a
larger number of people to a share in the divi-
dends of the moral principles than now prevail in
society. Socialism does not seem to be really a
program of more respect for men, but rather
of respect for more men. So far as it goes, even
this is an impulse in the direction ^of more au-
thentic democracy. More radically democratic,

ECONOMICS AND SOCIOLOGY OF LABOR 127

however, than any sociahstic principle, is the
perception that the capacity of people to convert
material goods and opportunities into higher
values is the last measure of price which it is
possible to apply. It is always an open social
question whether there are artificial and arbi-
trary restrictions of the equal freedom of all
to exercise this capacity. So far as a disposition
to entertain this question is an item in "the
general circumstances of the society," a force is
at work tending either to strengthen prices,
because they approximate a scale dictated by
due appraisal of human values, or to rearrange
prices with more regard for the human term in
the calculation.

There is no fig-leaf of economic shame dis-
creetly drawn over Smith's admission that all the
products of labor belonged to the laborer till
private property in land and the accumulation of
stock made a new situation. ^^ Although Smith
regarded these as artificial, in a sense contrasted
with primitive, it does not seem to have occurred
to him that they were artificial in a sense opposed
to his term "natural" any more than the division
of labor itself. There was nothing to excuse
about one of these phenomena more than about
all. In spite of keen vision for what he would

'^ Chap. VIII, p. 65.

128 ADAM SMITH AND MODERN SOCIOLOGY

regard as the accidents of a system which was
essentially rational or "natural," in spite of such
details as that, "We have no acts of parliament
against combining to lower the price of work;
but many against combining to raise it," ^^
Smith accepted the ground-plan of British eco-
nomic institutions as unassailable. The infer-
ences drawn by Marx from premises so nearly
identical with those of Smith would have seemed
to the latter so preposterous that he was under
no sort of embarrassment in stating those prem-
ises with perfect frankness. No social phenom-
ena had appeared to make Smith doubt that in
general the capitalist's claim to profits and the
landlord's claim to rent is as clear as the laborer's
claim to wages. In other words, slightly varying
our previous statement, Smith did not doubt
that the wage system was essentially a righteous
system, in spite of the fact that it permitted a
part of the product to go to the landlord, and
another part to the capitalist. The reasons which
seem to account for this apparent anomaly in
Smith's thinking have already been referred to.
They may be grouped under two heads: first,
the incomplete differentiation of laborer, capital-
ist, and landlord at Adam Smith's time; second,
the virtual universality of the functionally useful
»* P. 67.

ECONOMICS AND SOCIOLOGY OF LABOR 129

landlord and capitalist, wherever the differentia-
tion had occurred. ^^ That is, there was hardly
more room for doubt that the typical country
gentleman was an active part of the system of
agricultural production than that the farm hands
on the estate were economically productive; and
there was scarcely more doubt that the typical
capitalist was an active factor in the production
of manufactured goods than there was that the
hands in the mills were producers. To express
it in another way, at Adam Smith's time it was
in general true that a man was a landlord because
he was a producer, and a producer because he
was a landlord. In like manner, another man
was a capitalist because he was a producer, and
a producer because he was a capitalist. In either
case the landlord or the capitalist was doing
work that would have to be done by somebody,
if the given line of industrial efficiency were
maintained, regardless of the political and legal
arrangements that adjusted property rights with-
in the industrial system of the country. There
was a minimum of occasion for the kind of
analysis which would press the question : Is the
title of the landlord and the capitalist to a part
of the product based on their function in produc-
tion; that is, are these types merely varieties of

*' Cf. pp. 149-52, below.

130 ADAM SMITH AND MODERN SOCIOLOGY

laborers, worthy of their hire like other laborers;
or is that title based merely on their legal rela-
tions to the politico-economic system through
the institutions of property? Since this ques-
tion was not distinctly presented, it was easy for
the economic theorist to entail upon his successors
the confusion which we discussed above from a
slightly different point of view. Landlord and
capitalist, as landlord and capitalist, were not
sharply distinguished from landlord and capital-
ist as laborers. So it came about that a certain
odor of sanctity was thrown around the purely
legal claims of landlord and capitalist, and this
presumption excluded from economic theory
unprejudiced examination of the difference
between their claims as landlord and capitalist
and their claims as laborers. Thus economic
theory failed to discriminate at the outset between
the mere problem of accounting, between differ-
ent partners in a productive process, and the
moral problem of property rights based on any
other grounds than the relative value of services
performed by different individuals. This sup-
pressed moral element in social theory was a part
of the force that presently exploded in the form
of Marxian socialism. It has also furnished a
large fraction of the energy of general sociology.
We mav reduce the statement of the abortive-

ECONOMICS AND SOCIOLOGY OF LABOR 131

ness of early economic theory to this form : There
are questions of fact and of principle between
claims to material goods based on labor, and
claims based on conventionality. Th^ former
claims we may call essential; the latter we may
call institutional. Traditional economics assumed
that in their main lines essential and institutional
economic claims corresponded. As the social
system became more developed, the phenomena
of property presented anomalies which impeached
this assumption. The differences between the
classical economists and all their critics run back
to this one contrast. The latter have all along
insisted that the impeachment ought to be tried.
The former have protested that it should not.

Thus the issues between technical economics
and social philosophy in general are not economic
questions if we confine the term to classical
definition. They are moral questions which
economists have supposed to be coterminous with
principles of economic technology. For instance,
there is really no difference between Smith and
Marx on the economic elements in the principles
of profits, nor between Ricardo and Marx on the
economic elements in the principles of rent. The
quarrels between them arise over the righteous-
ness of social arrangements which impute to
classes of individuals economic functions in

132 ADAM SMITH AND MODERN SOCIOLOGY

accordance with the principles, and which assign
to those classes corresponding shares of goods,
while their actual share in the economic process is
questionable. Economic theory became conse-
quently a supporter of the system which assumed
the inviolability of the existing institutions of
property in land and capital. Demanding that this
question of inviolability be begged at the outset,
economic theory made scientific impeachment of
those institutions merely a question of time.
Bent on blocking any inquiry which probed back
of the righteousness of the ground-plan of our
institutions of property, economic theory has
been driven to amusing dodgings from pillar to
post in recourse to one explanation after another
which sought to justify vested rights on any other
ground than a social-service basis; i. e., that the
individual who enjoys the rights fulfils his part
of the social give-and-take by being a worker in
return for what he gets.

Again we point out the probability that there
would have been no Marxism, except as a politi-
cal movement, if economic theory, from Adam
Smith's time, had squarely faced the problem:
What are the primary economic elements, and
what are the accidental conventional elements, in
our system of property rights? We should prob-
ably have been spared a large part of the confu-

ECONOMICS AND SOCIOLOGY OF LABOR 133

sion which permits certain types of social agi-
tators to treat all private ownership of land as in
principle and in practice absentee landlordism,
and all private ownership of capital as in prin-
ciple and in practice stock-watering and gambling.
Modern sociology is a necessary protest as much
against the extreme prejudice of the economists
as of the socialists.^^

Another of the passages which provoke specu-
lation as to the direction which Adam Smith's
theory would take if he lived in our time occurs
in this chapter. ^^ It is as follows :

Is this improvement in the circumstances of the lower
ranks of the people to be regarded as an advantage or as
an inconvenience to the society? The answer seems at
first sight abundantly plain. Servants, labourers, and
workmen of different kinds, make up the far greater part
of every great political society. But what improves the
circumstances of the greater part can never be regarded
as an inconveniency to the whole. No society can surely
be flourishing and happy, of which the far greater part
of the members are poor and miserable. It is but

'" The beginnings of the classical subsistence-minimum
theory of wages, as contained in Chap. VIII of The Wealth of
Nations, may be passed over in this discussion, for the reason
that the technological aspects are made foremost, and the moral
question is not allowed to emerge. Thus the subject in this
form is an illustration of the above remarks about the sup-
pression of the paramount issue. The beginnings of the wage-
fund theory are also in this chapter (p. 70).

^P. 80.

134 ADAM SMITH AND MODERN SOCIOLOGY

equity, besides, that they who feed, clothe and lodge the
whole body of the people, should have such a share of
the produce of their own labour, as to be themselves toler-
ably well fed, clothed and lodged.^^

The only comment necessary is that in the
author's mind the phenomena of economic dis-
tribution still had something to do with ''equity.''
If he had believed that anything like the "iron
law of wages," which later theory asserted, told
the whole story, such a reference to "equity"
would have been an impertinence. The passage
immediately following this paragraph may be
called the prologue to Malthus' Essay.

The discussion of "The Profits of Stock," in
Chapter IX, continues the presumption that there
is no occasion for inquiry back of the prevailing
British economic system. The chapter is in no
sense an investigation of the social basis of the
system. It is merely an explanation of the way
the system works. The principal theorem is in
the first two paragraphs, viz. :

The rise and fall in the profits of stock depend upon
the same causes with the rise and fall in the wages of
labour, the increasing or declining state of the wealth of
the society; but these causes affect the one and the
other very differently.

The increase of stock, which raises wages, tends to
lower profit. When the stocks of many rich merchants

^ Italics mine.

ECONOMICS AND SOCIOLOGY OF LABOR I35

are turned into the same trade, their mutual competition
naturally tends to lower its profits; and when there is a
like increase of stock in all the different trades carried
on in the same society, the same competition must pro-
duce the same effect in them all.

We have said above all that is necessary to
mark the relation between these purely techno-
logical propositions and the more fundamentally
moral question of principles of distribution.^^
Neither the present propositions, nor the subse-
quent controversies about the relations which they
purport to formulate, are our direct concern.
They affect this argument only when they leave
the field of economic technique and touch upon
antecedent principles of social organization.
Smith recognizes the extra-economic variants in
the returns from capital in such instances as
these : ^^

A defect in the law [sic] may sometimes raise the
rate of interest considerably above what the condition
of the country, as to wealth or poverty, would require.
When the law does not enforce the performance of con-
tracts, it puts all borrowers nearly upon the same footing
with the bankrupts or people of doubtful credit in better
regulated countries. The uncertainty of recovering his
money makes the lender exact the same usurious interest
which is usually required from bankrupts. Among the
barbarous nations who overran the eastern provinces of

'•P. 119, et passim. "P. 98, Chap. IX.

136 ADAM SMITH AND MODERN SOCIOLOGY

the Roman Empire, the performance of contracts was
left for many ages to the faith of the contracting parties.
The courts of justice of their kings seldom intermeddled
in it. The high rate of interest which took place in those
ancient times may be partly accounted for from the same
cause.

This passage not only recognizes that less
effective legal administration affects property-
rights unfavorably, but it also implies that a more
effective legal administration affects property
rights favorably. ^^ Here again is a neglected
point of departure for a wider inquiry than
classical economic theory or practice looked upon
with favor. We may say that the problem was
near at hand : Under what circumstances, and in
accordance with what major and minor prin-
ciples, does it become the public interest that the
operation of economic self-interest should be
modified by positive law? Instead of facing the
problem candidly, the whole prestige of classical
economics was exerted in the nineteenth century
to discredit every tendency to entertain this
fundamental question. The assumption of classi-
cal economics was that all the laws which fortified
existing property interests were "natural,'' while
all laws which might tend to readjust existing

" Chapter X, Part II, is another illustration of the same
concession.

ECONOMICS AND SOCIOLOGY OF LABOR 137

property interests would be unnatural.'*^ This
was both moral and logical fallacy. In theory it
begged the question, and in practice it exerted the
right of might. To that extent it reduced eco-
nomic theory and practice to the status of an
untenable social provincialism. The human per-
ception that people are more than property was
bound sooner are later to repudiate that provin-
cialism. Marxian socialism is the extreme anti-
thesis of the smug assumption of the classicists
that conventional property rights are the normal
standard of public interests. Modern sociology
protests against the tendency at either extreme to
treat the question as an issue to be settled by
measure of strength between classes. It is a ques-
tion of social economy in the deepest sense. It is
a question of the ways and means of allowing all
human interests to realize themselves most har-
moniously. Whether the property institutions of
a given society afford the fairest field for pro-
portionate realization of all the social interests,
is a question that will always be in order, just as

" This proposition is apparently contradicted by the sturdy
fight of Adam Smith and some of his successors for "free
trade." The proposition is essentially correct, in spite of this
and other seeming exceptions. The wealth interests of any
country will easily convince themselves that it is "natural"
for the laws to give them more favor, but they will seldom
see anything "natural" in limitations of their scope.

138 ADAM SMITH AND MODERN SOCIOLOGY

much as the engineering question whether power
and friction in a given machine have been reduced
to the most efficient adjustment.

The initial fallacy of the system which de-
veloped from Smith's beginnings was, not that it
denied the existence of factors which vary the
operation of economic self-interest, but that it
assumed a permanent equilibrium between these
factors, a static condition so far as division of
function between economic and political forces
was concerned; and it resisted all impulses to
test the validity of the assumption. Whether
increasing divergence of economic class interest
had provoked attacks upon this position or not,
it is logically so naive that it could not perma-
nently have escaped detection as obvious sophis-
try. The most rudimentary sociological analysis
distinguishes between social conditions that are
due principally to the action of unmixed eco-
nomic forces, and those that are affected by the
volitions of individuals or groups. In so far as
social conditions are a product of the latter fac*
tor, or are susceptible of modification by the
latter factor, it is always a pertinent problem,
first, to what extent the conditions are due to
human will, and, second, to what extent, and by
what means, further exercise of human will

ECONOMICS AND SOCIOLOGY OF LABOR 139

might be in accordance with the entire system of
human interests.

The failure of classical economics to remain
on the level of Adam Smith's moral philosophy
is not to be found primarily in its specialization
upon economic technology, but in its dog-in-the-
manger spirit and practice toward the larger
questions than those of mere economic technique,
which had a fairly intelligent place in Smith's
thinking. By estopping investigation of these
larger relations of economic activity, the classical
economists turned a dignified division of Smith's
system into, not only a dismal, but a dangerous,
sectarianism. It became a class litany. As a
program it was relentless selfishness. As a
theory it was bigoted obscuration. Only persons
futile enough to be convinced by such perver-
sions could be surprised at the reaction which
appeared in the whole scale of dissent, from the
cautious inquiries by which John Stuart Mill
first gave sign that he was beginning to see with
his own eyes, to the vagaries of the most irre-
sponsible anarchist. If the economists had culti-
vated the whole philosophy of their teacher,
instead of an abstracted section of it, much of
the occupation of socialistic sectarians would
have been gone. If the economists had not sup-
pressed the truth on the one hand, there would

I40 ADAM SMITH AND MODERN SOCIOLOGY

have been less plausibility in the visions which
the socialists are exploiting on the other. There
are functional relationships in society which are
neither fixed by economic self-interest alone nor
prejudiced by the play of puerile speculation. A
social philosophy more comprehensive than
merely economic opportunism, is bound to make
progress toward discovery and interpretation of
these relations, and toward justification of social
programs which aim to secure for each of the
distinct social interests its due ratio of attention
in the conduct of life.

In connection with Chapter X, "Of Wage and
Profit in the Different Employments of Labour
and Stock," it should be pointed out that Smith
makes more of the labor element in the so-called
profits of some employments than has been
explicit in many of the later economists. Thus
in a typical case of small trade, he says: "The
greater part of the apparent profit is, in this case
too, real wages." ^^ Economic theory would have
kept ofif another lea shore if it had adhered to the
hypothesis that all legitimate income is essentially
a wage, the hire of labor rendered. It would
then have had a credible basis for criticism of all
incomes in the degree in which they are dispro-
portionate with services rendered by the persons

" I, p. 1 1 6.

ECONOMICS AND SOCIOLOGY OF LABOR 141

drawing the income. The fact has been, how-
ever, that, as a rule, the rent and interest ele-
ments of income have been defended less on the
ground of service performed by landlord or capi-
talist than for one or more of several alleged
reasons which are less convincing. To be sure,
it is often easy to detect in these arguments more
or less surreptitious recourse to the claim that the
landlord or the capitalist is a laborer, and there-
fore worthy of his hire. There is very seldom
any sign on the part of theorists who smuggle in
this appeal, that they are aware that, so far as the
consideration is pertinent at all in a given case,
it sanctions the income of the given capitalist or
landlord, but it does not touch, one way or the
other, the case of true economic interest or rent.
This has been pointed out with something
approaching finality by Bohm-Bawerk,^* but it is
impossible to determine to what extent respon-
sible economists even today have assimilated the
perception that the equities of interest and rent,
in the strict sense, are not illuminated in the
slightest degree by proof that given types of capi-
talists and landlords are entitled to wage. Not
even Marxians who understand their teacher
deny that the Astors and Rothschilds are entitled
to a wage for every stroke of labor that they per-

** Capital and Interest.

142 ADAM SMITH AND MODERN SOCIOLOGY

form. Modern questions of distribution turn
upon those factors of income which cannot by
any jugglings of terms or stretchings of imagina-
tion be accounted for as returns for services
rendered.

Chapter XI, "Of the Rent of Land," is even
more than the chapters on wages and profits an
account of what is ordinarily visible in trans-
actions between the parties concerned — in this
case landlord and tenant. As in the case of
profits, there is no indication that the thought of
examining the question why a landlord is entitled
to rent at all had ever occurred to Smith. The
relation of landlord and tenant, and the payment
of rent by the latter to the former, apparently
seemed to him hardly less a part of the neces-
sary order of things than the relation of children
to parents. In so far as the differences between
Smith's analysis of rent and Ricardo's are details
of economic technology, they are not pertinent to
our purpose. When we make the same inquiry
about Ricardo's relation to the problems of soci-
ology which we are now making about Adam
Smith, it will be proper to ask whether Ricardo
was more or less conscious than Smith of the
social factors, as distinguished from differences
of fertility, which the phenomena of rent brought
into question.

ECONOMICS AND SOCIOLOGY OF LABOR 143

The entire remainder of Book I is clear evi-
dence of the essentially technological character
of tb^ whole treatise. Pages 183-261, in particu-
lar, contain material which would be entirely in
place on the editorial pages of a financial or
trade journal. These pages, with those that
follow (261-73), are primarily valuable today as
material for history of the development of that
division of economic technology in which Ricardo
may be said to have formulated the Newtonian
laws. All through this technical discussion hints
occur pointing to the extra- or semi-economic
factors which have to be accounted and pro-
vided for, even in a predominantly economic con-
sideration of rent. None of these are sufficiently
prominent, however, to demand further attention
for our purpose. Smith himself states the
general fact in these words :

I shall conclude this very long chapter with observing
that every improvement in the circumstances of the
society tends either directly or indirectly to raise the real
rent of land, to increase the real wealth of the landlord,
his power of purchasing the labour, or the produce of the
labour of the people."

The difference in this connection between
classical economics and economic liberalism of all
types, to the extreme of Marxian socialism, is in

"P. 261, Henry Georgeism in the yolk.

144 ADAM SMITH AND MODERN SOCIOLOGY

a word that, both taking the above generaHzation
to be true, the former maintains that there is no
way to prevent the economic law from doing its
perfect work ; the latter maintains that the artifi-
cial arrangements of society have given to the
landlord class a monopoly of the advantages that
accrue from the workings of that economic law ;
and that mature social intelligence and compe-
tence must inevitably rearrange the institution
of property in land so that rent will be more
equitably distributed. The one declares that
there is no social problem at this point ; the other
declares that the social situation as respects rent
is impossible, and that class struggle must grow
more and more acute until the negation of
democracy involved in our system of land-tenure
is recognized, and the conflicting claims of
persons to the equity which society arbitrates are
settled so as to satisfy democratic standards of
justice.

There could be no more clear-cut illustration
of the facts that, in the first place, there are social
problems in which the economic factor consti-
tutes only one of the terms; and, in the second
place, that the economic factor is not necessarily
the decisive term. Rent is an economic phenome-
non which would be present, like the power of
falling water, regardless of property rights in the

ECONOMICS AND SOCIOLOGY OF LABOR 145

land or the stream. The rights that people shall
accord to each other in appropriating rent or
water-power must tend to reflect more and more
people's valuations of one another, not their con-
sideration merely of rent or of water-power. In
this connection the social problem is: Rent being
mi algebraically definable portion of the produce
of land, how shall we discover the formulae of
the relation of all the people to rentf This ques-
tion opens up the whole realm of super-economic
moral economy, or of sociology in the larger
sense.

When Adam Smith's chapters on rent were
written, the uneasiness in the American colonies
was not taken seriously enough to bring even
political democracy, as we now understand the
phrase, into the reckonings of practical politics.
An economic democracy which could call in ques-
tion the time-honored caste distinction between
the landlord and the landless was a possibility too
remote to attract Smith's attention. The out-
look of classical economics may accordingly be
represented by this question : The general struc-
ture of society as zve have it being final, what are
the conditions zvhich such a society confronts in
its attempts to increase material wealth? The
outlook of progressive democracy may be repre-
sented by the question: The general structure

146 ADAM SMITH AND MODERN SOCIOLOGY

of society as we have it not being final , what are
the conditions which an evolving society con-
fronts in its attempts to clear the way for increase
of all human values? Since the classical econo-
mists started with the assumption that things are
final which are not final, it is not at all surprising
that, after they had satisfied themselves about the
fact of rent and the measure of rent as actual
economic phenomena, they should at the same
time have felt satisfied that the formulas of rent
must apply to the ownership of rent as a social
phenomenon. But the phenomena of rent, like
the phenomena of exhaustion of the soil, would
be invariable in principle, whether a Conqueror
owned every foot of the land, or Plantagenet
feudalism prevailed, or nineteenth-century liberal-
ism developed, or Marxian socialism took posses-
sion. Who shall own the rent which accrues
according to certain laws, regardless of the insti-
.tutions of property, is a question as distinct from
the fact and the amount and the formulas of rent,
as the practical problem of an individual farmer,
whether or not he will adopt scientific methods of
cultivation, is distinct from the principles of
deterioration which the agricultural chemist
discovers.

We repeat, therefore, the primary claim of
this argument : that there is no proper incongruity

ECONOMICS AND SOCIOLOGY OF LABOR I47

between economic and sociological theory, and
that sociological inquiry in no sense challenges the
authority of economic technology, within the
field of its proper competence. The deadening
influence of classical economics was due to its
failure to see that human beings and their asso-
ciations, as well as their wealth-producing
technique, are in process of evolution; and that
this whole social process is a tribunal which must
continually review the judgments recorded in
parts or stages of the process. How does rent
arise, and how is it distributed in a given type of
society? are questions of pure economic technol-
ogy, and no sociology can supersede the
technology that discovers the positive answers to
those questions. Ought the type of society which
distributes rent in a certain way to be modified?
is a question which is just as pertinent in its place
as the question whether any medicine at all, and
if so what medicine, should be prescribed for a
given patient. The question of desirable social
modification can no more be answered solely by
the same technology which formulates the prin-
ciples of rent, than the questions of practical
medicine can be answered solely by anatomy or
analytical chemistry.

The classical economics was industrial posi-
tivism, but social fatalism. Human interests

148 ADAM SMITH AND MODERN SOCIOLOGY

could not permanently consent to be limited by
that type of impertinence. Human interests
promise the prevalence of some sort of a theory
of constructivism, not merely for one of their
elements, but for all combined. Classical
economics virtually proclaimed the finality of a
social regime in which the maximum production
of wealth should be the dominant purpose, and
the maximum development of persons should be
only a secondary consideration. All the social
philosophies which take issue, more or less
directly and consciously, with this central conten-
tion, virtually deny that wealth can be made the
criterion of life, and assert that the ultimate
standard of life must be found in people rather
than in their material conditions. This is really
reasserting Adam Smith's belief that the funda-
mental philosophy of life is moral, and that
economic technique is merely incidental to the
running of machinery which is always at last
subject as a whole to the disposition of laws
which lie outside of its own operation. We say
again that the main movement on the theoretical
side of present social problems is toward atten-
tion to the larger incidence of social relations
than the immediate successors of Adam Smith
recognized.

Before passing from this subject, it is necessary

ECONOMICS AND SOCIOLOGY OF LABOR I49

to quote one more passage, as a sample of the
indorsement which Adam Smith's unsuspicious
study of economics furnishes to present social
agitation. It is at the same time an index
of the attitude which he would have taken if he
had lived until his presumption of a statical
condition of social structure had been destroyed
by the actual changes that have occurred mean-
while. He says :

The whole annual produce of the land and labour of
every country, or what comes to the same thing, the whole
price of that annual produce, naturally divides itself, it
has already been observed, into three parts; the rent of
land, the wages of labour, and the profits of stock; and
constitutes a revenue to three different orders of people ;
to those who live by rent; to those who live by wages, and
to those who live by profit. These are the three great,
original, and constituent orders of every civilised society,
from whose revenue that of every other order is ultimately
derived.*^

** I italicize this sentence, not because there can be profit-
able dissent from it as a statement of historic fact, but because
Smith's present tense is apparently that of universal time. It
declares what, in his opinion, is, was, and shall be. But it by
no means follows that his mind would have been impenetrable
by the force of subsequent events. There would certainly have
arisen, sooner or later, a conflict between the implications of
his labor theory of the origin of wealth, and his assumption
of the permanence of the existing type of social structure. I
cannot imagine a man of his breadth and judicial poise persist-
ing in his view of the finality of a given social structure, if all
the light had been shed upon that view which intervening

I50 ADAM SMITH AND MODERN SOCIOLOGY

The interest of the first of these three great orders, it
appears from what has just now been said, is strictly and
inseparably connected with the general interest of the so-
ciety. Whatever either promotes or obstructs the one,
necessarily promotes or obstructs the other. When the
public deliberates concerning any regulation of commerce
or police, the proprietors of land never can mislead it,
with a view to promote the interest of their own particu-
lar order; at least if they have any tolerable knowledge
of that interest. They are, indeed, too often defective in
this tolerable knowledge. They are then only one of the
three orders whose revenue costs them neither labour nor
care, hut comes to them, as it were, of its own accord,
and independent of any plan or project of their own.
That indolence, which is the natural effect of the ease and
security of their situation, renders them too often not
only ignorant but incapable of that application of mind
which is necessary in order to foresee and understand the
consequences of any public regulation."

We must remember that the rack-renting
absentee landlord had not yet been examined

events have generated. Even the hints in the paragraph that
follows contain indications that he was partially aware of
possible anomalies in the workings of our institutions of
landed property. It is not at all difficult to believe that if he
had considered all the anomalies which are common knowledge
of all who have made fairly thorough use of social informa-
tion today, he might have been among those who say that
private property in land justifies itself just so long, and so
far, as it proves itself on the whole more serviceable to
society at large than any modifications that could be intro-
duced. (Cf. p. 129, above.)
« P. 263.

ECONOMICS AND SOCIOLOGY OF LABOR 151

under the microscope. The country gentleman
whom Adam Smith knew had probably never
furnished medical practice a case of nervous
prostration as a result of excessive attention to
duty, either as head-farmer of the estate, or as
magistrate, or as member of Parliament. He
was lazy enough at best, but as a type he always
represented a certain social service at worst. He
did not merely live a life of luxury and display
and riot in London, while people who worked in
Ireland stinted themselves to support his extrava-
gance by their tribute. It is inconceivable that
Adam Smith could have continued to regard
traditional laws of landed property as beyond the
region of debate, after the corollaries of those
laws had worked themselves out to the pitch of
absurdity which the extreme anomalies of
absentee landlordism have meanwhile exhibited.
Whatever Americans may think about the politi-
cal constitution of Germany, there is certainly
nothing visionary about her economics. Germany
has incorporated with her system of taxation so
nearly a system of social appropriation of the
rent element in the returns from land, that its
financial system is virtually a categorical denial
of the equity of tolerating a private income in the
form of rent in the strict sense. The lengths to
which Germany has gone in claiming rent for the

152 ADAM SMITH AND MODERN SOCIOLOGY

state, as a matter of public policy, are more obsti-
nate evidence than all the abstract arguments, that
the classical assumptions in this connection were
premature generalizations.

A word is also in order with reference to
Adam Smith's allusion, at this same point,^^ to
the fact that, while the interests of the order that
lives by wages are also intimately dependent upon
the interests of society in general, the members
of that order do not, as a rule, know^ how to
represent their own interests.

In the pubilc deliberations, therefore, [the laborer's]
voice is little heard and less regarded, except upon
some particular occasions, when his clamour is animated,
set on, and supported by his employers, not for his, but
their own, particular purposes.

Adam Smith was not so fatuous as to assume
that, if the laborer should one day rouse himself
from this numb acquiescence, or break away from
his stupid tutelage, he would be defying the laws
of political economy. In his pedantic scoldings
of modern liberalism, Herbert Spencer exploited
precisely that futile presumption. That which
Smith realized with regret, the defective social
activity of the wage-earner in contending for his
own economic interests, seemed to Spencer a
providential dispensation. The liberalism which
" P. 263.

ECONOMICS AND SOCIOLOGY OF LABOR i53

he bewailed and belabored ^^ was essentially the
very activity of the laboring man in his own
interest, the absence of which Smith lamented.
It is to be expected that while the masses of
wage-earners are getting their education they
will repeat many of the same errors which other
social classes have committed while they were
going through the same process. Democracy has
gone so far, however, in setting free the physical
and mental and moral energies of wage-earners
that they must necessarily exert an increasing
ratio of power in molding social institutions
according to the dictates of their interests. In
future litigation of class interests, labor is bound
to be better represented than in the past. This
means that, whether we will or no, the social
theorems which have seemed to cover the ground,
from the standpoint of property interests, are
bound to be revised so as to admit more accurate
calculation of the previously silent majority.
This not only must be, but should be. It is not
a symptom of social demoralization, but a sign
of healthy social progress. Speaking of those
who live by profit. Smith observes : ^^

The proposal of any new law or regulation of com-
merce which comes from this order, ought always to be
listened to with great precaution, and ought never to be

*• The Man vs. the State. *» P. 265.

154 ADAM SMITH AND MODERN SOCIOLOGY

adopted till after having been long and carefully examined,
not only with the most scrupulous but with the most
suspicious attention. It comes from an order of men
whose interest is never exactly the same with that of the
public, who have generally an interest to deceive and even
to oppress the public, and who accordingly have, upon
many occasions, both deceived and oppressed it.

The meaning of the laissez-faire clause in
classical economics was in effect: "Let capital-
istic interests alone in deciding for themselves
what laws shall be on the statute-books." We
have had a period of excessive liberty of capital
to exercise the predominant influence in making
the laws that affected its activities. We are
coming into an era in which non-capitalistic
interests are demanding their share of hearing
upon the same class of laws. There can be little
doubt that, whatever he might have thought about
specific traits and details of this modern develop-
ment, if he had lived to see it, Adam Smith
would have pronounced it in principle a tendency
in the direction of more just social balance.

IV

THE ECONOMICS AND SOCIOLOGY OF
CAPITAL

Before continuing the argument, we should
take our bearings by means of certain plain way-
marks, viz. :

First: The divisions of our subject-matter
correspond with those in The Wealth of Nations.

Second : Those divisions were necessarily
arbitrary.

Third : It was impossible for Adam Smith to
exclude consideration of capital from Book I of
The Wealth of Nations, although the subject of
the book was primarily labor.

Fourth: It was impossible for Adam Smith
to exclude consideration of labor from Book II,
although the subject of the book was primarily
capital.

Fifth: In following Smith's analysis of the
relations of labor to economic phenomena in gen-
eral, we encounter at every step relations of both
to wider moral phenomena.

Sixth : We shall have a like experience in
following his analysis of the relations of capital
to the economic process.

Seventh: This situation illustrates a wide
155

156 ADAM SMITH AND MODERN SOCIOLOGY

generalization, which is at the same time a socio-
logical axiom; viz.: None of the activities of
men occur in isolation from one another; they
form an interlocking process; they are therefore
factors at last in the whole system of moral*
cause and effect which presents the problems of
sociology.

Eighth : The consideration of economic
activities from the sociological point of view is
not therefore a matter of choice, if we admit the
obligation to learn the whole truth about
economic facts. The more-than-economic in the
relations is just as real an element in economic
activities as the simply-economic.

Ninth : In brief, the economic question is : To
what extent is it possible to discover relations of
cause and effect so far as they terminate in
wealth ?

Tenth : The corresponding sociological ques-
tion is : To what extent is it possible to discover
relations of cause and effect so far as they
terminate in persons ?

Eleventh : Since wealth can have no meaning
to our minds outside of relations to persons, it
follows that all formulas of wealth have the
logical rank of partial products, or trial divisors,
incidental to ultimate calculation of formulas of
persons.

ECONOMICS AND SOCIOLOGY OF CAPITAL 157

Twelfth: Consequently, when an economic
inquiry is started, the only alternatives are, first,
to arrest the process of inquiry arbitrarily with
the partial products or trial divisors reached by
economic analysis ; or, second, to press the inquiry
as far as it can be carried into the whole moral
situation which sociological methods try to
formulate.

Our argument, therefore, continues to indi-
cate the necessary relationships between Smith's
economic analysis and further analysis of causes
and effects throughout the whole range of human
interests.

The second book of The Wealth of Nations,
entitled "Of the Nature, Accumulation, and Em-
ployment of Stock," opens with a paragraph as
anachronistic, yet essentially as true, as for
instance Raphael's "School of Athens." In
order to indicate the substance of Smith's views
on this subject, we quote the opening paragraph
and summarize the remainder of the introduc-
tion:

In that rude state of society in which there is no
division of labour, in which exchanges are seldom made,
and in which every man provides everything for himself,
it is not necessary that any stock should be accumulated
or stored up before hand, in order to carry on the busi-
ness of the society. Every man endeavours to supply by

158 ADAM SMITH AND MODERN SOCIOLOGY

his own industry his own occasional wants as they occur.
When he is hungry, he goes to the forest to hunt; when
his coat is worn out, he clothes himself with the skin of
the first animal he kills; and when his hut begins to go to
ruin, he repairs it as well as he can, with the trees and
the turf that are nearest it.

But when the division of labour has once been thor-
oughly introduced, the produce of a man's own labour
can supply but a very small part of his occasional wants.
The far greater part of them are supplied by ... . pur-
chase But this purchase cannot be made till such

time as the produce of his own labour has not only been
completed but sold. A stock of goods of different kinds,
therefore, must be stored up somewhere sufficient to
maintain him. .... As the accumulation of stock must,
in the nature of the case, be previous to the division of
labour, so labour can be more and more subdivided in
proportion only as stock is previously more and more

accumulated As the division of labour advances,

therefore, in order to give constant employment to an
equal number of workmen, an equal stock of provisions,
and a greater stock of materials and tools than what
would have been necessary in a ruder state of things,
must be accumulated before hand. But the number of
workmen in every branch of business generally increases
with the division of labour in that branch, or rather it is
the increase of their number which enables them to class
and subdivide themselves in this manner.

As the accumulation of stock is previously necessary
for carrying on this great improvement in the productive
powers of labour, so that accumulation naturally leads
to this improvement. The person who employs his
stock in maintaining labour, necessarily wishes to em-

ECONOMICS AND SOCIOLOGY OF CAPITAL 159

ploy it in such a manner as to produce as great a quan-
tity of work as possible. He endeavours, therefore, both
to make among his workmen the most proper distribution
of employment, and to furnish them with the best ma-
chines which he can either invent or afford to pur-
chase. His abilities in both these respects are generally
in proportion to the extent of his stock, or to the number
of people whom it can employ} The quantity of industry,
therefore, not only increases in every country with the
increase of the stock which employs it, but in consequence
of that increase, the same quantity of industry produces
a much greater quantity of work.'^ ^

Book II consists of one hundred and nine
pages, and is devoted to amplification of these
propositions. Again we must point out that it is
no part of our task to inquire into the correct-
ness or adequacy of the purely economic formulas
or implications. This work has been done by the
economists themselves. It would be worse than
waste to attempt to do independently the work of
criticizing Smith, which the economists have vir-
tually been carrying on in co-operation for more
than a century. So far as we want the pure
economics of capital, rather than its sociology,
we must go for instruction to the output of
economic analysis down to the present time.^

* Italics mine. " I, pp. 275, 276.

'Thus the literature of the subject is brought down to a
late date by Bohm-Bawerk in Capital and Interest and The
Positive Theory of Capital. The same author has recently

l6o ADAM SMITH AND MODERN SOCIOLOGY

Our concern, however, is not with the merits or
defects of Smith's views as parts of a system
of private or pubHc accounting. Our inquiry
deals with the relation of his views about "stock,"
as he phrased it, to the whole social process, and
especially to the development of a theory of the
whole social process. In particular, we have to
ask whether Smith's theory of capital did, or left
undone, anything that an adequate theory of the
whole social process must correct. Or did his
treatment of the subject furnish occasion for
his successors to act as though his theory was
more comprehensive and exhaustive than it was,
or than he presumed it to be ?

At the outset, we must take into consideration
two or three things similar to those which have
already been referred to in connection with rent.
In the first place. Smith had no more thought
that the capitalists as such could ever be called
upon to show cause why they should exist, than
he had that it was necessary to entertain any such
vain speculation about landlords. The reason,
in either case, was that to Smith's mind the class
in question performed an indispensable social
function, although that particular form of con-
returned to the subject: vide Quar. Jour, of Econ., Vol. XXI,
pp. 121 ; 247-82. Cf. Fisher, The Nature of Capital and
Income (1906), pp. 53 ff., et passim.

ECONOMICS AND SOCIOLOGY OF CAPITAL i6i

cept or of expression may not be attributed to
him. More than this, Smith seemed to have no
doubt that landlords and capitalists were, with
tolerable regularity, functioning according to
type. The sentence which I have italicized above *
probably does not directly assert this, but a part
of the ambiguity of the sentence is apparently
due to Smith's assumption that status and fitness,
or function, have a sort of foreordained harmony
in the different industrial orders. By "abilities"
he probably did not mean talents, but rather scope
for the exercise of talent. That is, his main propo-
sition was that the amount of stock, as a rule,
determines the extent to which division of labor
and possession of improved machinery are pos-
sible. This is a rouglily correct economic prin-
ciple, and we could raise no questions of detail
concerning that phase of it which have not
received ample attention from the economists.
One cannot avoid suspecting, however, that a
little of the other thought was also in Smith's
mind, viz., that the man who has the stock is the
man best capable of organizing the labor and
selecting or inventing the machinery; that is, to
use sociological technicalities, he is ex officio, so
to speak, functioning according to the implica-
tions of his status, and his income is a fair reward
for his work. Whether Smith really meant this
*P. 159.

i62 ADAM SMITH AND MODERN SOCIOLOGY

or not, and whether or not it was generally true
in his time, we have meanwhile witnessed develop-
ments in which the exceptions to the rule are
certainly more frequent than he supposed, and
those exceptions must today be accounted for in
formulas of the social sanctions of capital that
can successfully run the gauntlet of criticism.
That is, we perceive today, , to an extent that
Adam Smith did not, first, that the division of
the ownership of capital among individuals is a
resultant of the coworking of economic and of
conventional forces, not the product of either
alone; second, that, under the operation of our
conventionally adapted economic system, there
are already enough contrasts between large
incomes from capital and small compensating
service to authorize inquiries whether there are
faults in the conventional factors of our property
system; whether our theories of the rights of
property are on the final basis ; whether the artifi-
cial elements in our property systems are sus-
ceptible of modifications which would tend toward
closer correspondence between service and
income.

In other words, the problems which Smith
took up were problems of industrial accounting,
viz. : What are the mathematics of the factors
in national economic systems as they are at

ECONOMICS AND SOCIOLOGY OF CAPITAL 163

present geared together? He saw no occasion
for opening the question whether the conven-
tional fashions of gearing the economic factors
were susceptible of improvement. This latter is
the social question in a nutshell, and it has been
the most effective stimulus making for the
development of sociological science.

A change has occurred in this connection since
Smith wrote. Because the conventional factors
in our economic institutions have come to be
social and sociological problems, economists as
technical experts, and all other theorists, have
been under pressure to accept one or the other
horn of a dilemma which had not presented itself
to Adam Smith. The alternative runs back to
Smith's account of "stock." ^

He says:

When the stock which a man possesses is no more
than sufficient to maintain him for a few days or a few
weeks, he seldom thinks of deriving any revenue from it.
He consumes it as sparingly as he can, and endeavours by
his labour to acquire something which may supply its
place before it be consumed altogether. His revenue is,
in this case, derived from his labour only. This is the
state of the greater part of the labouring poor in all
countries.

But when he possesses stock sufficient to maintain
him for months or years, he naturally endeavours to derive

= Pp. 276, 277.

i64 ADAM SMITH AND MODERN SOCIOLOGY

revenue from the greater part of it; reserving only so
much for his immediate consumption as may maintain
him till this revenue begins to come in. His whole stock,
therefore, is distinguished into two parts. That part
which, he expects, is to afford him this revenue, is called
his capital. The other is that which supplied his immedi-
ate consumption; and which consists either, first, in that
portion of his whole stock which was originally reserved
for this purpose ; or, secondly, in his revenue, from what-
ever source derived, as it gradually comes in; or, thirdly,
in such things as had been purchased by either of these
in former years, and which are not yet entirely consumed;
such as a stock of clothes, household furniture, and the
like."

The dilemma concealed in these propositions
is the following: When the principles on which
revenue from stock rests come to divide social
classes, shall economic theory abide by this divi-
sion of stock into that which is and that which is
not ''capital," and shall economic theory accept
the burden of proof that private property in
capital and all that goes with it is just as unques-
tionable as private property in the portion of
stock which is not capital ; or shall economic
theory evade the issue by refusing to recognize
the validity of the distinction which Smith
proposed ?

At first glance it may seem to be a mere choice
between words, whether we call a workman's

' Italics mine.

ECONOMICS AND SOCIOLOGY OF CAPITAL 165

clothes and furniture ''capital" or not. It may
even appear to be a mark of superior insight to
decide that a carpenter's hammer and saw and
plane are capital, as truly as the Rothschilds'
banking funds ; because in the end the tools help
the carpenter to get a revenue just as truly as the
gold helps the banker to his income. If, however,
we discover that marked differences appear in
the relative amounts of conventionality or the
relative amounts of useful work concerned in
getting an income from one sort of stock and
another, we are aware that very serious differ-
ences may be involved in the contrasts between
the two kinds of stock in their relation to ultimate
questions of income. Since Smith's time, events
have thrust the reality of a difference in social
effect, as well as in social origin, between the two
divisions of stock into prominence. Whether
five dollars' worth of clothes on a workman's
back, and five hundred thousand dollars' worth of
machinery under the management of a single
owner, and five hundred million dollars' worth of
securities manipulated by a small group of men
who have a purely absentee relationship to the
industries that give the securities a value —
whether these three blocks of stock are abstractly
of the same nature or not, concretely they are not
of the same nature. They have effects as

1 66 ADAM SMITH AND MODERN SOCIOLOGY

diverse as the difference between men who must
go on foot, and those who go in carriages, and
those who have private railroad trains.

The question which Smith discussed was vir-
tually: What are the reasons for the scale of
remuneration paid to persons who go on foot, to
those who use carriages, and to those who use
private railroad trains, efficiency in covering dis-
tance being the sole criterion on which the scale is
based ? The question which has meanwhile come
to the front is: What other factors does justice
require in the standard of compensation, in view
of the fact that a conventional distribution of
means of locomotion has introduced artificial
advantages and disadvantages between the com-
petitors? To assert that all stock is capital may
be in accordance with certain essential facts. This
truth may, however, be so asserted as virtually
either to beg the social question or to rule it out
of court, although it has come to be an inevitable
question since Adam Smith's time.

Whatever might have been his position if he
had lived till today. Smith's actually expressed
views on the differences between the two kinds
of stock do not tend to confirm the contention of
those who virtually hold that the technology of
production is the sole guide to the equity of dis-
tribution. They tend rather to sustain the con-

ECONOMICS AND SOCIOLOGY OF CAPITAL 167

tention of those who hold that the organization
of production at a given time may give an artifi-
cial prominence to some of the persons v^ho
control production, and so may not be a fair
index of the equities of distribution. The case
between these two contentions should be tried in
connection with a later stage in the development
of economic theory. It is enough at this point to
have indicated by this particular instance how far
economic theory at Smith's time failed to cover
the ground of present social problems.

There is no proposition in pure economics
which might not be made a point of departure
from which to explore the whole social process.
Our present search, however, is not for oppor-
tunities to show how economic facts are related
to other social facts, but to discover, first, the
extent to which Adam Smith expressly correlated
economic facts with other social activities, and,
second, how his correlations or failures to corre-
late left problems in sociological interpretation
which must be solved before social theory can be
stable. Having pointed out that Smith did not
inquire into the sociology of private property in
capital, but merely analyzed its technology, all
that remains to be said about Book II is merely
incidental.

For instance, we are reminded that the ^*law

i68 ADAM SMITH AND MODERN SOCIOLOGY

of diminishing returns" had not yet been reduced
to precision, by such a proposition as the follow-
ing:

The produce of land, mines, and fisheries, when their
natural fertility is equal, is in proportion to the extent
and proper application of the capitals employed about
them. When the capitals are equal, and equally well ap-
plied, it is in proportion to their natural fertility.^

This is, of course, a purely economic generali-
zation, and we note it simply as an index of the
stage of theory to which it belongs. In the same
connection, however, and without apparent
thought that the observation leads beyond the
boundaries of economic technology. Smith notices
that the degree of public security is a variant of
the law of capitalization.^ Again, referring to
luxurious consumption by the idle. Smith ven-
tures a generalization which is approximately
true from the standpoint of capitalization, but
not equally true as a sociological proposition, viz. :

.... it promotes prodigality, increases expence in con-
sumption without increasing production, or establishing
any permanent fund for supporting that expence and is
in every respect [sic'\ hurtful to the society.®

It is hardly necessary to urge that "in every
respect" is an exaggeration. A court ball, or a
coronation celebration, is rated by nearly the

' Pp. 283, 284. « P. 284. • p. 295.

ECONOMICS AND SOCIOLOGY OF CAPITAL 169

whole population of the capital, and perhaps of
the kingdom, as a promoter of general prosperity.
This may be an extremely loose judgment, but it
contains elements which are as valid in them-
selves as the contradictory judgment just quoted.
There are circumstances when prodigal expendi-
ture by the rich may be a remedy preferable to
the disease. Circulating accumulated wealth
among honest bread-winners, even if their trades
are not of the most necessary type, may diminish
possible capital for the moment, but it may keep
a large contingent from lapsing permanently into
pauperism.

The wage-fund theory appears also in embryo
in Book II; e. g., i, p. 296.

Much more important than either of these
items is an innocent, but pervertible, paragraph
in the third chapter ; viz. :

The proportion, therefore, between the productive and
the unproductive hands, depends very much in every coun-
try upon the proportion between that part of the annual
produce, which, as soon as it comes either from the
ground or from the hands of the productive labourers, is
destined for replacing a capital, and that which is destined
for constituting a revenue, either as rent, or as profit.
This proportion is very different in rich from what it is
in poor countries."

However wide the leap may be in logic, in

'"I. pp. 338, 339.

lyo ADAM SMITH AND MODERN SOCIOLOGY

practice the transition is easy from this percep-
tion of fact to an emphasis on the fact which con-
verts it into a rule of Hfe and a goal of life. It is
highly improbable that Smith himself would have
tolerated the pagan conception that the ranking
moral law is, Capitalize ! The economic theorists
and theories and practices that followed him
became perverts to that pseudo-morality to a
degree which has seriously embarrassed the corre-
lation of economics with moral principles. Smith
is in no way responsible for this, except as
the man who draws attention to a phenomenon
may be the guiltless cause of unfortunate action
with reference to the phenomenon. In this case
the unfortunate action has been excessive honor
to the policy of capitalization.

It is unnecessary to argue the point, for, say
from the beginning of the twentieth century,
there has been a general tendency among econo-
mists the world over to admit that economic
theory has overemphasized production and neg-
lected the theory of consumption. In fact, our
social philosophy and our working moral stand-
ards are seriously distorted by the impression
that there is superior merit in the capitalization of
wealth, irrespective of the demand for consump-
tion in the society that has produced the wealth.
Capitalistic theories tend to interpret consump-

ECONOMICS AND SOCIOLOGY OF CAPITAL 171

tion merely as a means to production. This is
the necessary and proper perspective in a pure
theory of economic technique. At the same time
it is ocular proof that a theory of economic
technique is merely a relative clause in a philoso-
phy of human affairs. In a rational system of
which the center is persons, not things, production
can have no complete meaning except as a pur-
veyor to consumption. Production is the lower
virtue, and consumption is the higher. To capi-
talize wealth in order to produce more wealth,
when consumption of the same wealth would
produce better people, is prostitution. From the
standpoint of sociology the history of nineteenth-
century economics, both theoretical and applied,
has yet to be interpreted with just attention to
this distinction. From Adam Smith to Mill,
the emphasis of the economists lent itself more
and more to deepening the impression that capi-
talization is the first duty of the man who can get
hold of anything to capitalize; and that, like the
formula "corban" with the older Pharisees, the
plea of "the interests of capital" absolves the
devotees of production from responsibility to the
claims of humanity.

Note should be taken also that, in Smith's
analysis, there are premonitions of the explana-
tion of returns to capital which we now associate

172 ADAM SMITH AND MODERN SOCIOLOGY

chiefly with the name of Senior, and which has
come to be known as the "reward-for-akstinence
theory." Inasmuch as the relations concerned
are still in debate, it is not remarkable that Smith
hardly thought of them as debatable. One is
provoked to query whether Smith could have
reconciled this part of his views with the doctrine
of labor as the source of wealth already discussed.
Possibly he would have answered that the two
dicta applied to different steps in the economic
process, and that both might be true in their
proper place. Indeed, it would be unfair to Smith
to assume that he had offered an alternative
explanation of the same thing. When the analy-
sis of returns from capital is pursued to the last
detail, the relation of labor to these returns is
more evident than Smith made it in this connec-
tion; but the reason is that he is not now talking
primarily of wealth, but of capital. He is also
merely putting into words very commonplace
facts. He is not probing far below the surface
for explanations. He expresses the facts in
terms of ''parsimony" :

Capitals are increased by parsimony, and diminished

by prodigality and misconduct Parsimony, and not

industry, is the immediate cause of the increase of capital.
Industry, indeed, provides the subject which parsimony
accumulates. But whatever industry might acquire, if

ECONOMICS AND SOCIOLOGY OF CAPITAL 173

parsimony did not save and store up, the capital would
never be the greater That portion of his rev-
enue which a rich man annually spends, is in most cases
consumed by idle guests, and menial servants, who leave
nothing behind them in return for their consumption."

In so far as these propositions are to be taken
as generalizations of the process of increasing
capital, the term "parsimony" has to be under-
stood with a sHding scale of meaning — from the
most pinching literalness at the one extreme, to
exuberant metaphor at the other. When the
multimillionaire converts the surplus dividends,
which he could not consume if he would, into
capital to produce more dividends, his proced-
ure would hardly be termed "parsimony" outside
the Pickwick Club. The extravagance of this
metaphor in the case of ordinary commercial
capital has been amply exposed by multitudes of
critics of Senior. It is worth referring to here,
however, as one of the incipient forms of a pre-
judice which presently became a considerable
obstruction to dispassionate analysis of the phe-
nomena of capitalistic revenue. We shall find
the best conditions for an accounting between
economics and sociology on this subject when we
come to later phases of the social problem.

The remainder of the chapter from which

"I, pp. 342, 343.

174 ADAM SMITH AND MODERN SOCIOLOGY

the last quotations are taken is accelerated motion
toward apotheosis of capitalization. It is not
fallacious. It is in substance profoundly wise.
It is, however, merely the theory of one section
of prudence. It simply does not raise the ques-
tion of adjustment between the interests of capi-
tal and the interests of men. It encourages the
inference that whatever makes for the interests
of capital ipso facto makes for the interests of
people. The mischievous force of this inference
is far from spent in the beliefs and practices of
society, and it is a principal task of sociology to
bring the truth into larger perspective.

In the fourth chapter of Book II Smith's
frank dissection of economic reality has an efifect
in the opposite direction from that just noted.
Since the justice of interest, dividends, or profits
has been systematically challenged by the social-
ists, there has been a decided tendency among the
economists either directly to affirm or covertly to
assume some form of labor title as the justifica-
tion of all revenue from capital. This plea not
only finds no support in The Wealth of Nations,
but its author bluntly blurts out his perception
that revenue in the form of interest is not a
compensation for the owner's work, but a
compensation for his idleness. He says:

ECONOMICS AND SOCIOLOGY OF CAPITAL I75

The stock which is lent at interest is always considered

as a capital by the lender The borrower may use

it either as a capital, or as a stock received for immediate

consumption The stock which is lent at interest is,

no doubt, occasionally employed in both these ways, but
in the former much more frequently than in the latter.
.... The only people to whom stock is commonly lent,
without their being expected to make any very profitable
use of it, are country gentlemen who borrow upon mort-
gage

A capital lent at interest may, in this manner, be con-
sidered as an assignment from the lender to the borrower
of a considerable portion of the annual produce; upon
condition that the borrower in return shall, during the
continuance of the loan, annually assign to the lender
a smaller portion, called the interest; and at the end of it,
a portion equally considerable with that which had origi-
nally been assigned to him, called the repayment

In proportion as that share of the annual produce which
.... is destined for replacing a capital, increases in any
country, what is called the monied interest naturally
increases with it. The increase of those particular capitals
from which the owners wish to derive a revenue, without
being at the trouble of employing them themselves^ natur-
ally accompanies the general increase of capitals; or, in
other words, as the stock increases, the quantity of
stock to be lent at interest grows gradually greater and
greater."

The expression italicized is repeated on page
364. The thought had evidently not occurred to
Adam Smith that the lender of stock had a

" Italics mine. " Pp. 356-59.

176 ADAM SMITH AND MODERN SOCIOLOGY

claim, in that capacity, to be treated as a worker.
It had never entered his head to doubt that the
lender was entitled to his interest, but he rested
the right on the naive position stated on pages
362, 363, viz. : "As something can everywhere be
made by the use of money, something ought every-
where to be paid for the use of it." If financial
transactions had grown no more complicated
than they were when that sentence was written,
there would be a minimum of impulse to chal-
lenge such plausible fairness. But today opera-
tions, which are as different from furnishing stock
to a user as a stone is from bread, shelter them-
selves under the sanction of the general claim of
capital to interest. The nature of that claim calls
for analysis. The problem of making the analysis
is a cardinal task of sociology. The economic
factors in the problem are deceptive until they
are reduced to the denominator of personal
values and personal service. When we apply
this test, we shall prove that our ideas about the
basis of present legal claims to income from capi-
tal must sooner or later undergo drastic recon-
struction.

In Chapter V of Book II Smith discusses
"The Different Employment of Capitals." The
general thesis is :

Though all capitals are destined for the maintenance

ECONOMICS AND SOCIOLOGY OF CAPITAL i77

of productive labour only, yet the quantity of that labour,
which equal capitals are capable of putting into motion,
varies extremely according to the diversity of their em-
ployment, as does likewise the value which that employ-
ment adds to the annual produce of the land and labour
of the country."

Then Smith distinguishes four ways in which
capital may be employed ; viz. : first, "in procur-
ing the rude produce annually required for the
use and consumption of the society;" second,
"in manufacturing and preparing that rude prod-
uce for immediate use and consumption;" third,
"in transporting either the rude or manufactured
produce from the places where they abound to
those where they are wanted;" fourth, "in
dividing particular portions of either into such
small parcels as suit the occasional demands of
those who want them." "It is difficult to con-
ceive," he adds, "that a capital should be employed
in any way which may not be classed under some
one or other of these four."

It is obvious that this fourfold classification
of capital is primarily economico-technological,
and only remotely social. The discussion which
follows of the relative value to the commonwealth
of the different ways of employing capital has
significance for sociology simply in so far as it

" P. 365.

178 ADAM SMITH AND MODERN SOCIOLOGY

tends to determine a formula for the economic
factor in situations in which alternative uses of
capital raise questions of social utility in the
large. The discussion does not go far enough
to approach the questions of adaptation which
present themselves in twentieth-century com-
munities, except as it points out certain generic
distinctions. This by no means ignores the
value even of this preliminary analysis. It con-
tains homely wisdom which is not likely to be
outgrown by the most sophisticated social science.
It is, nevertheless, the wisdom of the market, not
of the forum. The sterile generality of the dis-
cussion as a whole may be indicated by the
following passage, which, at the very moment
when the words were printed, events were rapidly
turning into one of the most foolish prophecies
on record:

It has been the principal cause of the rapid progress
of our American colonies towards wealth and greatness,
that almost their whole capitals have hitherto been em-
ployed in agriculture. They have no manufactures, those
household and coarser manufactures excepted, which
necessarily accompany the progress of agriculture, and
which are the work of the women and children in every
private family. The greater part both of the exporta-
tion and coasting trade of America, is carried on by the
capitals of merchants who reside in Great Britain. Even
the stores and warehouses from which goods are retailed

ECONOMICS AND SOCIOLOGY OF CAPITAL 179

in some provinces, particularly in Virginia and Maryland,
belong many of them to merchants who reside in the
mother country, and afford one of the few instances of
the retail trade of a society being carried on by the capi-
tals of those who are not resident members of it. Were
the Americans, either by combination or by any other sort
of violence, to stop the importation of European manu-
factures, and, by thus giving a monopoly to such of th^ir
own countrymen as could manufacture the like goods,
divert any considerable part of their capital into this em-
ployment, they would retard instead of accelerating the
further increase in the value of their annual produce, and
would obstruct instead of promoting the progress of
their country towards real wealth and greatness. This
would be still more the case, were they to attempt, in
the same manner, to monopolize to themselves their whole
exportation trade.^®

It is not finical nor hypercritical to abstract
from this chapter the casual sentence : "But the
great object of the political economy of every
country, is to increase the riches and power of
that country." ^^ We need not comment upon it
at length. It is merely a confession of the strictly
technological character of the discipline so desig-
nated. It is incidentally a proof that the modern
economists who want to give their science
a different scope have broken with the
tradition which The Wealth of Nations
established. Some of them are tending toward

" Pp. 272, 373- " P. 378.

i8o ADAM SMITH AND MODERN SOCIOLOGY

readjustment with the fundamental moral philos-
ophy of which The Wealth of Nations was a
specialization; others are tending toward spe-
cialization of a different sort, as, for instance,
on the one hand, the theory of taxation, or finance,
or currency, or banking, or transportation; or,
on the other hand, the converting of economics
into a psychology of economic valuations. This
readjustment of the perspective of economic
science cannot be complete until it brings
economic activities into focus as merely one of
the interdependent factors of the evolving pur-
poses of persons.

ECONOMIC VS. SOCIOLOGICAL INTER-
PRETATION OF HISTORY

Book III of The Wealth of Nations treats of
"The Different Progress of Opulence in Dif-
ferent Nations," More evidently than in any
earlier section of The Wealth of Nations, the
second of the two elements of the author's method
now appears, the opposite tendencies of which
were never fairly brought to light till the time of
Cliffe Leslie. These are the deductive and the
historical methods. Neither of these two
methods was developed to its extreme results.
Neither was put in the form of a distinct thesis
in methodology. There could consequently have
been no formal doctrine of the relations between
them. Both were mobilized for Smith's pur-
poses, and each was worked out by Smith's suc-
cessors as a methodology which implied
precedence over the other. Perhaps it is easy to
overestimate the credit due to Smith for the
balance which his own thinking maintained
between the two methods. Perhaps the very fact
that each was semi-defined, semi-conscious, in h^s
own mind, detracts from his individual merit
i8i

i82 ADAM SMITH AND MODERN SOCIOLOGY

for the resulting sanity of his thinking. The
fact remains, however, that, while Smith's analy-
sis compares with the work of later economists,
according to either program, merely as a begin-
ning compares with a relatively finished product,
yet it also appears in the same comparison like a
great architectural design in contrast with elabo-
rately finished parts of a structure not yet
assembled in a completed building.

In other words, the deductive and the histori-
cal methods were not alternatives in Smith's sys-
tem. They were partners. The historical or
inductive method was appealed to so frankly that
no one who goes back to Smith as a path-maker
in economics can consistently disparage the his-
torical factor of the method which he used. The
deductive method was employed with equal
frankness, but in the general plan of his argu-
ment the interdependence of the inductive and
the deductive steps in the formation of con-
clusion was preserved in a way that forms
a highly creditable approach to satisfaction of
those canons of proof which John Stuart Mill
formulated almost a century later. That is,
Smith realized the necessity of deriving principles
to be used deductively from inductive generaliza-
tions of previous experience. In this general
form, his science was therefore more catholic

INTERPRETATION OF HISTORY 183

and more convincing than that of his successors
who obviously overworked the one or the other
element of proof, and in either case left the
proof limping from the weakness of the neg-
lected support. In subsequent economic theory
the illustrations have been many and conspicuous,
on the one hand of a-priori use of generalizations
not supported by a sufficient induction, and on
the other hand of historical data-collecting which
became virtually an end unto itself, because not
carried to a completeness that afforded credible
generalizations.^

Speaking in the rough, there is only one
source from which to derive principles of human
conduct. That source is historical induction. Of
course, this proposition extends the term "his-
torical" beyond its ordinary meaning. Every-
thing is past, and thus "historical," as soon as it
has occurred, and thus made itself material for
reflection. The present has become the past while
the observer adjusts his attention to it. In this
sense inductions from experience are the only
positive source for generalizations of valid prin-
ciples. Book III of The Wealth of Nations is,
in the first instance, an attempt to show why
wealth has increased in different ratios in differ-
ent nations. This particular inquiry, strictly

^ Cf. Bagehot, above, pp. 67 fF.

i84 ADAM SMITH AND MODERN SOCIOLOGY

limited, is merely a question of the world's finan-
cial bookkeeping. Strict limitation of the inquiry
to this phase, however, would be arbitrary, as the
world's bookkeeping, and the activities which it
records, are essential to the world's higher activi-
ties. Next above the significance of the passage,
as a study of the growth of wealth, is its signifi-
cance as a theorem in methodology. It throws
its weight on the side of the claim that the
world's experience, as a whole, is the source of
the world's science; not merely that part of the
world's experience which consists chiefly of intro-
spection of the mind's grinding upon itself, with
neglect of the objective experience which fur-
nishes the proper grist for the mind.

It is worth notice, too, that in this book Smith
again incidentally recognizes the institutional or
volitional factor, as a variant in the operation
of what he regarded as the "natural" economic
factors. Thus:

Had human institutions, therefore, nfever disturbed the
natural force of things, the progressive wealth and in-
crease of the towns would, in every political society, be
consequential, and in proportion to the improvement and
cultivation of the territory or country.^

The whole of Book III, indeed, from our
present point of view, is notable for these two

' P. 386.

INTERPRETATION OF HISTORY 185

primary reasons : first, it appeals to the historical
method of establishing economic principles;
second, it appeals to social occurrences to explam
variations in the action of economic forces. If
these two principles had been allowed their share
of influence since Adam Smith, there would
have been little room for divergent schools of
economic theory, and scarcely an appreciable
demand for the differentiation of sociologists. It
is not very extravagant hyperbole to say that the
whole methodology of social science is an elabora-
tion of the implications of these two principles.

Even in this strictly economic investigation,
however, reflections occur which show that
Smith was closely related by affinity with the
modern theoretical and practical movements
toward placing society on a frankly telic basis.
For example, in discussing the reasons why entail
justified itself in one state of society and not in
another, he says :

When great landed estates were a sort of principalities,
entails might not be unreasonable. Like what are called
the fundamental laws of some monarchies, they might
frequently hinder the security of thousands from being
endangered by the caprice or extravagance of one man.
But in the present state of Europe, when small as well as
great estates derive their security from the laws of their
country, nothing can be more completely absurd. They
are founded upon the most absurd of all suppositions,

1 86 ADAM SMITH AND MODERN SOCIOLOGY

the supposition that every successive generation of men
have not an equal right to the earth, and to all that it
possesses; but that the property of the present generation
should be restrained and regulated according to the
fancy of those who died perhaps five hundred years ago.'

This chapter is also a brief of the whole
economic and social argument against slavery as
a method of production. It is also in effect a
demonstration of the fallacy of laissez faire as a
general principle or universal precept. It shows
that legislation may either kill or cure according
to circumstances, and according to the fitness of
the legislation. For example, speaking of the
impossibility of securing the highest state of cul-
tivation without the security of the farmer's
tenure, Smith says:

In England, therefore, the security of the tenant is
equal to that of the proprietor Those laws and cus-
toms so favourable to the yeomanry have perhaps contrib-
uted more to the present grandeur of England than all
their boasted regulations of commerce taken together.*

Perhaps the most important element in this
portion of The Wealth of Nations, from our
point of view, is the cumulative argument that
laws and institutions make or mar economic as .
well as more general prosperity. If the ocular
proof had not meanwhile been furnished, it would
have been incredible that social theory could fall

' P. 390. * P. 397.

INTERPRETATION OF HISTORY 187

from the high level of Adam Smith's outlook to
the pitiable shallowness of the laissez-faire
theory. Because certain types of interest did not
want the government to perform certain types of
actions, formulas of temporary policy were
gravely promoted to the rank of inflexible prin-
ciples, to the effect that goverment violates the
fundamental order of society if it modifies
economic action at all. The humor of the situa-
tion was in the fact that the very people who
most zealously fed the altar-fires of this super-
stition had first taken elaborate precautions to
build up around their own interests the most
rigid system of legal safeguards that had ever
surrounded vested right since the strictest period
of the Roman law.

VI

THE PROBLEMS OF ECONOMIC AND OF
SOCIOLOGICAL SCIENCE

In the ''Introduction" to Book IV, entitled
"Of Systems of Political Economy," Smith
divulges more explicitly than before his concep-
tion of political economy as a distinct science.
According to his description it is, as we have
claimed, a technology of wealth-production, first
for the people and second for the state. Political
economy, according to this description, is "a.
branch of the science of a statesman or legisla-
tor." As we have seen, all the sciences tributary
to statesmanship and all other parts of the theory
of conduct were to men of Adam Smith's type
details subordinate to an inclusive moral
philosophy.^

Book IV is a critique of systems of political
economy, or rather of two principal systems;
viz., first, "the commercial or mercantile sys-
tem," second, "the agricultural systems, or those
systems which represent the produce of land as

^ In another book I shall call attentiori to the instructive
antithesis between Smith's conception of the relations of politi-
cal economy and that of Von Mohl, Encyklop'ddie der Staats-
wissenschaften, 2d ed., pp. 57, 58.

189

IQO ADAM SMITH AND MODERN SOCIOLOGY

either the sole or the principal source of the
revenue and wealth of every country."

The thread of Smith's argument in this book
is not altogether clear at first sight. The reader
might suppose that the book would include a pre-
cise account of the system of political economy
which the author supposed to be valid. In fact,
the discussion is virtually a continued exposition
of his own labor theory of political economy, by
the indirect method of exposing the errors of the
mercantilist and the agricultural theories. When
he reaches the second of these systems,^ he assigns
as his reasons for treating it briefly that it has
never done any great harm, and is never likely to.
That is, he was somewhat of the opinion of the
boy who defined salt as "the stuff that makes
'taters taste so bad when you don't put any on."
By implication Smith justifies his long discussion
of the mercantilist theory on the ground that it
has done harm, and is likely to do more. In effect,
however, these criticisms are merely to fill out his
own labor theory of economics which was
sketched in the first two books.

The plan of our study does not permit atten-
tion to the details of Smith's exposition. We
are now interested simply in those indications
which betray Smith's opinions about the relations
*n, 179.

ECONOMIC AND SOCIOLOGICAL SCIENCE 191

of economic technique to the inclusive moral
order.

It is in point, however, to reinforce the
observation made in the last paragraph of Section
V. While leading up to an argument in support
of a certain economic system. Smith artlessly
describes notorious types of manipulation of
opinion, and of government, to procure legisla-
tion favorable to special interests. That is, he
shows how the commercial interests retained
theorists to formulate philosophies reflecting
their views, created a tradition which made these
special interests the center or foundation of
abstract and applied economic systems, and
induced Parliament to legislate these special inter-
ests into the position of vested and fortified
interests. This done, the same interests turned
about and demanded, both directly and through
their theoretical attorneys, that legislation should
henceforth be declared a vice! That is, having
secured their own interests by law, it should
henceforth be forbidden to other interests to get
the same advantage from law! As we have
said, this delicious naivete was not the rule of a
nursery game. It was the serious contention of
Britain's strongest men for the larger part of a
century, and it is still making a strong bid for the
rank of economic orthodoxy both in England

192 ADAM SMITH AND MODERN SOCIOLOGY

and the United States! Referring to the mer-
cantilist theories, Smith says :

Such as they were, however, those arguments con-
vinced the people to whom they were addressed. They
were addressed by merchants to parliaments, and to the
councils of princes, to nobles, and to country gentlemen;
by those who were supposed to understand trade, to those
who were conscious to themselves that they knew nothing
about the matter. That foreign trade enriched the coun-
try, experience demonstrated to the nobles and country
gentlemen as well as to the merchants ; but how, or in what
manner, none of them well knew. The merchants knew
perfectly well in what manner in enriched themselves. It
was their business to know it. But to know in what
manner it enriched the country, was no part of
their business. The subject never came into their
consideration, but when they had occasion to apply
to their country for some change in the laws relat-
ing to foreign trade. It then became necessary to
say something about the beneficial effects of foreign trade,
and the manner in which those effects were obstructed
by the laws as they then stood. To the judges who were
to decide the business, it appeared a most satisfactory ac-
count of the matter, when they were told that foreign
trade brought money into the country, but that the laws
in question hindered it from bringing so much as it
otherwise would do. Those arguments heretofore pro-
duced the wished-for effect The title of Munn's

book, England's Treasure in Foreign Trade, became a
fundamental maxim in the political economy not of
England only, but of all other commercial countries. The
inland or home trade, the most important of all, the trade

ECONOMIC AND SOCIOLOGICAL SCIENCE 193

in which an equal capital afifords the greatest revenue,
and creates the greatest employment to the people of the
country, was considered as subsidiary only to foreign trade.
It neither brought money into the country, it was said,
nor carried any out of it. The country therefore could
never become either richer or poorer by means of it,
except so far as its prosperity or aecay might indirectly
influence the state of foreign trade.

The thesis which Smith opposes to the mer-
cantihst assumption is compressed into the
following proposition :

It would be too ridiculous to go about seriously to
prove that wealth does not consist in money, or in gold
and silver; but in what money purchases, and is valuable
only for purchasing. Money, no doubt, makes always a
part of the national capital; but it has already been shown
that it generally makes but a small part, and always the
most unprofitable part of it.^

It would be an excursus from the main path
of our argument to cite such a proposition, if it
were not more pregnant today than it was when
it was written. So far as we can judge of the
mental content of the most intelligent men of
that period, it appears that the proposition must
have been much more narrowly technological to
them than it is to us. Since psychological and
sociological analyses of value, and consequently
of wealth, have reorganized the associations which

' P. 437.

194 ADAM SMITH AND MODERN SOCIOLOGY

the proposition suggests, we are bound to find it
conclusive for reasons much more comprehen-
sive than even Smith himself could have clearly
apprehended.' It would be an interesting diver-
sion to fortify this judgment by analyzing the
course of argument through which Smith sup-
ports the theorem. It is largely a most ingenious
discussion of the relative economic utility of
money, or the precious metals, and other com-
modities.^ While the analysis is remarkably
skilful, our attention is necessarily arrested by
the contrast between its emphasis and that which
would appear in a modern exposition of the same
subject. That is, we should now support the
same thesis less upon strictly economic grounds,
and more upon psychological and sociological
grounds.

As a connecting link between different stages
of economic theory and practice. Smith's conclu-
sion about the social consequences of the mer-
cantilist theory must be noticed, viz. :

The two principles being established, however, that
wealth consisted in gold and silver, and that those
metals could be brought into a country which had no
mines, only by the balance of trade, or by exporting to a
greater value than it imported; it necessarily became the
great object of political economy to diminish as much as
possible the importation of foreign goods for home con-

*Pp. 437-50.

ECONOMIC AND SOCIOLOGICAL SCIENCE 195

sumption, and to increase as much as possible the expor-
tation of the produce of domestic industry. Its two great
engines for enriching the country, therefore, were re-
straints upon importation and encouragements to exporta-
tion.'

We are not committed to inquiry into the
history of economic theory far enough to find
out how much of Smith's repudiation of niercan-
tiHsm was the result of his own initiative and
how much the effect of the teachings of the ,
Physiocrats.^ The main point for our purpose is
that Smith dehberately stated it as his aim to
treat the case against mercantihsm strictly in its
bearings upon the increase of national wealth.
That is, he prescribed for himself a distinctly tech-
nological inquiry, and excluded as far as possible
all ulterior considerations of the relations .
between wealth and the other factors of welfare.
Having enumerated the two types of restraints
upon importation, and "the four types of device
adopted to promote exportation, under mercan-
tilism,'^ Smith announces his plan of attack as
follows :

The two sorts of restraints upon importation above
mentioned, together with these four encouragements to .

' P. 450.

® Boisguillebert, 1707; the French-Irishman Cantillon, 1755;
Quesnay, 1758; Gournay, 1702-59; Turgot, 1727-81 ; etc.
'P. 451.

196 ADAM SMITH AND MODERN SOCIOLOGY

exportation, constitute the six principal means by which
the commercial system proposes to increase the quantity
of gold and silver in any country by turning the balance
of trade in its favour, I shall consider each of them in a
particular chapter, and without taking much further
notice of their supposed tendency to bring money into the
country, I shall examine chiefly what are likely to be the
effects of each of them upon the annual produce of its
industry. According as they tend either to increase or
diminish the value of this annual produce, they must evi-
dently tend either to increase or diminish the real wealth
and revenue of the country.^

We must again define the standpoint from
which we are analyzing The Wealth of Nations.
In brief, we are pointing out, first, that Adam
Smith was fundamentally a moral philosopher,
and that every division of his thinking was sub-
ordinated, in his own mind, to an inclusive moral
philosophy; second, that, in selecting the prob-
lems of wealth for minute investigation, Smith
abstracted a body of phenomena from the whole
body of moral phenomena, and treated them as
though they could be considered as suf^cient unto
themselves; third, that in so doing Smith set the
pace for a technology of wealth, as an end unto
itself; fourth, that such a technology is enor-
mously important, but that, for this very reason,
it tends to overbalance the other elements of a

' P. 452.

ECONOMIC AND SOCIOLOGICAL SCIENCE 197

comprehensive moral philosophy ; for instance, to
take a concrete illustration, it begs the question
whether it is conceivable that Englishmen might,
on the whole, be better off under the less produc-
tive of two economic systems. It contains no hint
of the possibility that in a given situation improve-
ments in the system of distribution may do more
than increase of production toward promoting
welfare. In other words, this technology of
wealth confidently assumes that the total wel-
fare of a people is in direct proportion to the
aggregate of wealth, and it therefore makes
wealth the center of calculation, while the com-
plete or even wider welfare of human beings
comes into view only as a subsidiary con-
sideration. There is no sufficient reason to infer
that, in Smith's case, this temporary obscuration
of the moral by the economic meant any confu-
sion about the ultimate subordination of the
economic to the moral. It was merely a provi-
sional arrest of attention upon the economic
phases of moral relations. Our further
contention is, however, fifth, that there was a
strong undertow in economic theory pulling
toward complete isolation of economics from
morals, and toward a valuation of wealth above
the other elements of human welfare. That is,
the foundation of moral philosophy tended to

198 ADAM SMITH AND MODERN SOCIOLOGY

disappear from beneath social theory, and it
tended to become a bare economic technology.
If the extreme decline into unmorality is to be
connected with the name of a single economic
writer, J. R. McCullock (1779-1864) may safely
be nominated for the distinction. Our main
argument is, sixth, that this abstraction of the
economic phase of activity and theory from the
totality of human activities, and from compre-
hensive moral philosophy, is a temporary provin-
cialism. Human activities are not thus isolated;
and theories of human activities, although they
may call themselves sciences, are vicious theories
to the extent that they depend upon presump-
tions of the isolation and independence of
classes of activities. In other words, what-
ever be the content of economic theory, it
must find for itself a valid correlation with the
whole scope of positive moral philosophy, before
it can recover the relative dignity which belonged
to it in Adam Smith's scheme of morality.

For the reasons restated in the foregoing
paragraph, our study does not call for detailed
discussion of the following six chapters.^ They
are primarily technological with reference to the I
frankly proximate end — the production of ]
wealth. References to more ultimate ends are
inevitable tributes to the larger constitution of

» Book IV, Chaps. II-VII.

ECONOMIC AND SOCIOLOGICAL SCIENCE 199

things, which cannot be successfully ignored, and
which Smith, even as a technologist, apparently
never desired to ignore. Such references are, at
best, however, casual, not essential to the techno-
logical argument. The one cumulative argu-
ment within the field of our present interest,
which these chapters unintentionally enforce, is
that there is the most intimate and incessant
reaction between all economic activities and all
customs and laws of the societies maintaining
the activities. The relations of cause and effect
between these different classes of activities are so
evident that it would be a priori impossible to
imagine a theory of them which would pre-sup-
pose their virtual independence. Nearly the
whole weight of the classical economics, how-
ever, was cast into the balance on the side of the
illusion that economic activities constitute a
species of perpetual motion sufficient unto itself,
and that this sanctuary would be profaned if it
were in any way disturbed by the other social
interests. The classical political economy well-
nigh succeeded in suppressing the larger question :
What ratio does the wealth factor in the human
equation bear to all the other factors of welfare
in typical situations? So far as its influence
prevailed, the classical economics left the impres-
sion, not only that all other human problems

200 ADAM SMITH AND MODERN SOCIOLOGY

must defer to the wealth problem, but that the
solution of the wealth problem is ipso facto the
solution of all other human problems. In other
words, the classical political economy tended
toward abandonment of the attempt to interpret
life as a moral problem, and substituted an
attempt to interpret life in terms of the tech-
nique of economic production.

Nor is this all. The economic production which
the classical economics had in mind was the pro-
duction, not of the actual human beings whose
essential moral relations were fairly apprehended.
It was the production of an aggregate of individ-
uals whose moral relations were considered, for
the purposes of economic theory, to be in a con-
dition of foreordained and permanent status. The
most preposterous feature of this naive presump-
tion was that it serenely accepted, as a statical
condition, the unsocial activities of predatory
economic self-interest, artfully intrenching itself
behind social contrivances which the lawmakers
were induced to create, and then piously anathe-
matizing the endeavors of any competing interest
that attempted to get like reinforcement for itself !
This presumption alone damned the classical
economy. Economic activities are merely frac-
tions of the total self-expression of men whose
moral relations are in a perpetual flux of re-

ECONOMIC AND SOCIOLOGICAL SCIENCE 201

adjustment. A fundamental sociological problem
is that of determining the formulas according to
which these economic and moral activities are
varying functions of one another.

It cannot be too often repeated that these
judgments are not passed on the philosophy of
Adam Smith, but on the degenerate scion of his
theory which we know as the classical economics.
Our thesis is that the sociologists are contending
for a return to the moral basis upon which Adam
Smith's economics rested. Not that the specific
content of his moral philosophy could be vindi-
cated now, but that his philosophy was primarily
moral, instead of primarily technological. He
saw, as economists half a century after him had
become almost incapable of seeing, that economic
processes are, and must be, at last, incidents of
larger moral processes. This might easily be
illustrated in such a case, for example, as the
ultimate reasons which he adduces for peaceful
accommodation between the mother-country and
the American colonies.^ ^

The concluding paragraph of Chapter VIH
is in Smith's most frank and sententious style :

It cannot be very difficult to determine who have been
the contrivers of this whole mercantile system; not the
consumers, we may believe, whose interest has been en-

^" Vol. II, pp. 134-38, et passim.

202 ADAM SMITH AND MODERN SOCIOLOGY

tirely neglected; but the producers, whose interest has
been so carefully attended to; and among this latter class
our merchants and manufacturers have been by far the
principal architects. In the mercantile regulations, which
have been taken nqtice of in this chapter, the interest of our
manufacturers has been most peculiarly attended to, and
the interest, not so much of the consumers as that of some
other sets of producers, has been sacrificed to it."

Turning to the second type of political econ-
omy, Adam Smith says :

The agricultural systems of political economy will
not require so long an explanation as that which I have
thought it necessary to bestow upon the mercantile or
commercial system.

That system which represents the produce of land as
the sole source of the revenue and wealth of every
country has, so far as I know, never been adopted by any
nation, and it at present exists only in a few men of great
learning and ingenuity in France. It would not, surely,
be worth while to examine at great length the errors of a
system which never has done, and probably never will
do any harm in any part of the world."

Smith finds the capital error of this system
in ''its representing the class of artificers, manu-
facturers and merchants, as altogether barren
and unproductive." ^^

Yet Smith continues:

This system, however, with all its imperfections, is
perhaps the nearest approximation to the truth that has

"II, 178. "II, Chap. IX, p. 179- "II, 192.

ECONOMIC AND SOCIOLOGICAL SCIENCE 203

yet been published upon the subject of political economy,
and is upon that account well worth the consideration of
every man who wishes to examine with attention the
principles of that very important science." Though in
representing the labour which is employed upon land as
the only productive labour, the notions which it inculcates
are perhaps too narrow and confined; yet in representing
the wealth of nations as consisting, not in the incon-
sumable riches of money, but in the consumable goods
annually reproduced by the labour of society; and in
representing perfect liberty as the only effectual expedient
for rendering the annual reproduction the greatest pos-
sible, its doctrine seems to be in every respect as just as it
is generous and liberal/''

This passage incidentally justifies me in call-
ing Smith's theory "labor economics," in dis-
tinction from "mercantile" or "agricultural"
economics. ^^ Although we have been taught to
call Smith's theory the "system of natural lib-
erty," his own statement shows that "natural
liberty" is the voluntary means of increasing
wealth rather than the ultimate principle upon
which the production of wealth depends. This
perception does not affect one way or the other
the main contention that Smith's economics was
virtually a chapter in his moral philosophy. He
does not directly argue that "natural liberty"

" Of course, this proposition must be understood as ex-
plained by pp. 189, 190, above.

" II, 196. '" I ; cf. p. 205, below.

204 ADAM SMITH AND MODERN SOCIOLOGY

is the best means to the production of wealth
because it is right. It is the best means because
it is most productive. This would not preclude
the argument from purely moral grounds that
natural liberty is an economic imperative because
it is right. Smith's conviction of its righteous-
ness, however, appears to have sprung very largely
from his belief that it was expedient. Although
he would have regarded the utilitarianism of Ben-
tham as bizarre, yet he was practically much less
removed from the logic of Benthamism than he
would have been willing to admit if Bentham
had been more nearly his contemporary.^^

Another summary of Smith's whole economic
philosophy, with just a hint of its bearing upon
general social philosophy, occurs at the close of
Book IV, and deserves a place in this digest :

It is thus that every system which endeavours, either, by
extraordinary encouragements, to draw towards a particular
species of industry a greater share of the capital of the so-^

" One might make a good deal in support of this judg-
ment out of a passage in Smith's Lectures on Justice, etc.
(Cannan), pp. ii, 13. Having remarked that in a monarchy
the principle of authority prevails, but in a democracy that
of utility, Smith continues : "Men in general follow these
principles according to their natural dispositions. In a man of
a bold, daring and bustling turn the principle of utility is pre-
dominant, and a peaceable, easy turn of mind usually is pleased
with a tame submission to superiority." The objections to the
suggested use of the passage are obvious enough, but on the

ECONOMIC AND SOCIOLOGICAL SCIENCE 205

ciety than what would naturally goto it ; or, by extraordinary
restraints, to force from a particular species of industry
some share of the capital which would otherwise be em-
ployed in it; is in reality subversive of the great pur-
pose which it means to promote. It retards, instead of
accelerating, the progress of the society towards real
wealth and greatness; and diminishes, instead of increas-
ing, the real value of the annual produce of its land and
labour.

All systems, either of preference or of restraint, there-
fore, being thus completely taken away, the obvious and
simple system of natural liberty establishes itself of its
own accord.^* Every man, as long as he does not violate
the laws of justice, is left perfectly free to pursue his
own interest his own way, and to bring both his industry
and capital into competition with those of any other
man, or order of men. The sovereign is completely dis-
charged from a duty, in the attempting to perform which
he must always be exposed to innumerable delusions, and
for the proper performance of which no human wisdom
or knowledge could ever be sufficient; the duty of super-
intending the industry of private people, and of directing it

whole it is worth noting in this connection. Cf. loc. cit. for
Smith's statement of the grounds of utility which "ought to
make marriage perpetual ;" also pp. 94 flf. on master and ser-
vant. Dugald Stewart expressed a judgment quite in the
line of my conclusion. (Account of the Life, etc. [Bohn ed.],

p. XXX.)

In Part I, Sec. 3, of the same lectures, entitled by the
editor "How Republican Governments Were Introduced," the
explanation is utilitarianism of a most frankly opportunistic
sort.

" Cf. p. 203, above.

2o6 ADAM SMITH AND MODERN SOCIOLOGY

towards the employments most suitable to the interest of
the society. According to the system of natural liberty,
the sovereign has only three duties to attend to; three
duties of great importance, indeed, but plain and intelli-
gible to common understandings; first, the duty of protect-
ing the society from the violence and invasion of other
independent societies; secondly, the duty of protecting, as
far as possible, every member of the society from the in-
justice or oppression of every other member of it, or the
duty of establishing an exact administration of justice;
and thirdly, the duty of erecting and maintaining certain
public works and certain public institutions, which it
can never be for the interest of any individual, or any
small number of individuals, to erect and maintain; be-
cause the profit could never repay the expence to any
individual or small number of individuals, though it may
frequently do much more than repay it to a great so-
ciety.'"

At this point the sociologist may be pardoned
for musing:

Of .... the fruit

Of that forbidden tree, whose mortal taste

Brought death into the world, and all our woe.

The a-priori political philosophy which, from
Plato down, imposed upon social theory one of
the stupidest dei ex machina in the whole Wal-
halla of superstition, that inflexible monster of
pedantic imagination, "sovereignty," betrays
itself in this passage, and furnishes one of the

" II, pp. 206, 207.

ECONOMIC AND SOCIOLOGICAL SCIENCE 207

important clues to the fatuity of the classical
economy. The vitality of Smith's fundamental
morals could not save his theory until it could be
delivered from the bondage of this arbitrary
dogma. This is merely a more occult way of
saying that inadequate analysis of the general
social process set very strait bounds for exten-
sion of the positive method which Smith honestly
applied so far as his doctrinal limitations would
permit. A mechanical political philosophy was
accomplice before the fact in a large part of the
misconduct of classical economics. From one
point of view modern socialism is the natural
rebound, not so much from eighteenth-century
economic theory, as from its stilted political pre-
conceptions. I merely call attention in passing
to this factor in the evolution of modern social
theory. I hope to return to the subject in another
connection.

The metaphysical doctrine of "sovereignty" is
as distinct from the literal fact of sovereigns, of
various types, as the Ptolemaic theory of the uni-
verse was from the facts of astronomy. Govern-
ments actually exert a quasi-absolute power over
subjects within territory which legal fictions may
treat as beyond the prerogative of other govern-
ments. For convenience we may call govern-
ments, or nations, if we please, "sovereigns."

2o8 ADAM SMITH AND MODERN SOCIOLOGY

We may take our own chances of escaping the
confusions involved in the traditional problems
of the actual location and sanctions of sover-
eignty; whether in the government itself, in "the
state," in the people collectively, in the people
individually, or in some other conceivable or
inconceivable sanctuary. In any case, the politi-
cally organized groups to which a more or less
fictitious sovereignty has always been ascribed
carry on collective activities. These activities are
costly. The expenses have to be met. There is
nothing fictitious about the fiscal needs of states.
At the same time, the questions of national
revenue may be treated as purely technological
problems, which have no more immediate refer-
ence to the larger problems of human welfare
than the technology of production in the strict
sense.

VII

THE RELATION OF ECONOMIC TECH-
NOLOGY TO OTHER SOCIAL TECH-
NOLOGIES, AND TO SOCIOLOGY

The fifth book of The Wealth of Nations
treats of "The Revenue of the Sovereign or
Commonwealth." It is not worth our while to
inquire how advisedly Smith used these terms;
i. e., whether he was entirely free from use of
the term "sovereign" in a shifting sense. If it
were, it would be necessary to show, from such
passages as the opening paragraphs of Book V,
Chapter I, Part IV,i that Smith meant by "the
sovereign" sometimes the commonwealth, some-
times the monarch, and perhaps sometimes an
undefined third something, apparently corre-
sponding with one of the German concepts of
"the state" as distinguished from the other alter-
natives. Our question is, however: To what
extent did Smith recognize separate spheres of
activity for various social technologies, and to
what extent did he provide for the subordina-
tion of fiscal technique to a larger range of moral
requirements? Was his treatment of public

*n, p- 339.

209

2IO ADAM SMITH AND MODERN SOCIOLOGY

revenue merely political technology, or was it,
beyond that, an inquiry in ethics?^

Apparently Smith conceives of the fiscal prob-
lem, not merely as technical, but as broadly
moral. This is certainly true if the last para-
graph in the fourth book is to be taken at face
value. It reads :

The proper performance of those several duties of the
sovereign necessarily requires a certain expence; and this
expence again necessarily requires a certain revenue to
support it. In the following book therefore, I shall en-
deavour to explain: first, what are the necessary expences
of the sovereign or commonwealth; and which of those
expences ought [sic] to be defrayed by the general con-
tribution of the whole society; and which of them, by
that of some part only, or of some particular members of
the society; secondly, what are the different methods in
which the whole society may be made to contribute to-
wards defraying the expences incumbent on the whole so-
ciety and what are the principal advantages and
inconveniences of each of those methods; and thirdly,
what are the reasons and causes which have induced
almost all modern governments to mortgage some part of
this revenue, or to contract debts, and what have been
the effects of those debts upon the real wealth, the an-
nual produce of the land, and labour of society. The

^ In either case, it is to be noted that Book V exhibits a
radically different conception of the relation of political econ-
omy to political science from that of Von Mohl. Cf. above,
p. 189.

ECONOMIC TECHNOLOGY AND SOCIOLOGY 211

following book, therefore, will naturally be divided into
three chapters.^

Taken literally, this paragraph is a requisition
upon the total resources of moral philosophy.
The word ''ought" occupies a place in the first
division of the subject which might have delighted
the soul of Kant. The terms "advantages" and
"inconveniences" might be adopted as blanket
phrases for all the criteria which could be insisted
on by the most exacting telic philosophy. The
third inquiry points directly toward radical prob-
lems in social psychology, but the last clause seems
to put the ban on these larger interpretations.
It seems to indicate that, after all, in Smith's
reckoning, all the oughtness and the convenience
were merely utility with reference to wealth
alone, and that no account was to be taken of
utilities in which wealth was simply a mediate
term. Some close scrutiny of Book V is neces-
sary, therefore, in order to make out how far
either of these appearances is to be credited.

On any theory of political society whatsoever,
so long as men remain in a state which makes
resort to war tolerable, the costs of war must be
defrayed. Civil society must, therefore, find
ways of paying the bills of war. This is the
first item on the debit side of Smith's discussion

' II, p. 207.

212 ADAM SMITH AND MODERN SOCIOLOGY

of national revenue. Neither the morality of
war, nor the economics of war in the wider
sense, is here brought into account. The points
are, first, that wars occur ; second, that they must
be paid for somehow.^ With not a little of the
spirit of Herbert Spencer,^ Smith shows that,
with the development of institutions, in general,
and of the art of war in particular, the expense
of war is shifted largely from the individual
fighters, and becomes a charge upon the fiscus.
While the abundance of the material betrays
Smith into diffuseness upon what might be called,
in a very loose sense, the sociology of war, all
that it amounts to is amplification of the proposi-
tion that every civilized nation must have a
military budget.

Part II of the same chapter expands the
proposition that the administration of justice is
costly, and that the cost must be covered by
national revenues. Again, the discussion takes a
wide range, in securing historical evidence for
the platitude. Incidentally the discussion asserts,
in the most unrestricted fashion, that property is
privilege, and that it is the creature of social voli-
tion. This perception, of course, makes any

* II, pp. 208 ff.

^Principles of Sociology, Part V, Chap. XII, "Military
Systems."

ECONOMIC TECHNOLOGY AND SOCIOLOGY 213

selected property system, according to Smith'3
general philosophy, liable to answer for its justi-
fication before the ultimate tribunal of social
appeal. This corollary is merely latent in Smith's
argument. The main point is that property
questions demand an administration of justice,
and this is also a charge on the national budget.*'
Other variants of disturbed relations, more or
less involved with property, and all reinforcing
the demand for a legal system, are the different
kinds of subordination that grow up in society;
e. g., from variations of personal qualifications,
from differences in age, from differences in
wealth, and from differences in the prestige of
birth.

Here again Smith is on the borderland of
analytical sociology; but, while his observations
are pertinent, they merely furnish padding for
the 'essential proposition. In the whole of Book V
Smith indulges in wider detours from the
direct path of his argument than in the earlier
parts of the work. To change the figure, he
does not hew close to the economic line, but cuts
into the Imaterial of political science. For
example, at the close of Chapter I, Part II : ^

When the judicial is united to the executive power,
it is scarce possible that justice should not frequently be

'II, pp. 22T, 228. ^11, pp. 240, 241.

214 ADAM SMITH AND MODERN SOCIOLOGY

sacrificed to, what is vaguely called, politics. The person
entrusted with the great interests of the State may, even
without any corrupt views, sometimes imagine it neces-
sary to sacrifice to those interests the rights of a private
man. But upon the impartial administration of justice
depends the liberty of every individual, the sense
which he has of his own security. In order to
make every individual feel himself perfectly secure
in the possession of every right which belongs to
him, it is not only necessary that the judicial should be
separated from the executive power, but that it should be
rendered as much as possible independent of that power.
The judge should not be liable to be removed from his
office according to the caprice of that power. The regular
payment of his salary should not depend upon the good-
will, or even upon the economy of that power.

Part III of Chapter I treats in a very similar
way the items of expense for "pubHc works and
pubHc institutions." The main thesis is continued
in the opening paragraph :

The third and last duty of the sovereign or common-
wealth is that of erecting and maintaining those public
institutions and those public works, which, though they
may be in the highest degree advantageous to a great
society, are, however, of such a nature that the profit
could never repay the expence to any individual or small
number of individuals, and which it therefore cannot be
expected that any individual or small number of individu-
als should erect or maintain. The performance of this
duty requires two very different degrees of expence in the
different periods of society.^

MI, p. 241.

ECONOMIC TECHNOLOGY AND SOCIOLOGY 215

At first reading, if one knew nothing of the
previous argument, one might infer that the
author of this paragraph had in mind a range of
pubHc works which would tend rather toward
the sociaHstic than toward the laissez-faire
extreme. If we reflect, however, that the term
"advantageous" in Smith's vocabulary meant in
this connection "favorable to the production of
wealth," the apparent implications of the passage
are considerably modified. The really material
thing is the claim that some public works must be
maintained by the state. There is little doubt,
however, that the assumptions behind this claim
in Smith's mind would lean logically much
further toward liberalism than the doctrines of
the l^ter classical economy. In the second para-
graph, for instance,^ Smith groups the "works"
which he has in mind chiefly in two classes; viz.,
first, "those for facilitating the commerce of
society," and, second, "those for promoting the
instruction of the people." Here is a distinct
proposition which the Spencerian type of indi-
vidualism abhorred, and which cannot be regarded
as primarily in the classical sense.

Smith's treatment of the first group falls
mainly within the scope of pure economic theory,
if we include in economic theory the equities of

•II, p. 241.

2i6 ADAM SMITH AND MODERN SOCIOLOGY

exchange, considered solely on the basis of market
value of services rendered. The reasoning, how-
ever, is neither as clear nor as convincing as in
the earlier parts of the treatise. As in the case of
the two previously named items of public expendi-
ture, the problem of apportioning the amount
between individuals and the public is by no means
conclusively solved. The argument drops rather
from the level of scientific analysis to that of the
essay setting in order accepted commonplaces.
The reasons assigned for division of expense are
rather more definite under this third head of
"public works," than under the two previous
titles. At the same time, more is left to be
desired in this connection than in almost any
other case which Smith undertakes to analyze.
I enumerate the reasons which he expressly
alleges, and return to the subject after reaching
the close of the chapter. The reasons named are
these : First, facility of collecting pro-rata shares
of the cost from users of the improvement ; as in
the case of highways, bridges, canals, etc. ; but,
on the contrary, certain ill-workings of the toll
system lead to a somewhat futile discussion of
the relative advantages of private and public
ownership of toll rights, and to anticipation of
questions of taxation, which had been assigned
to the next chapter. Second, in the case of works

ECONOMIC TECHNOLOGY AND SOCIOLOGY 217

necessary to facilitate some particular branches
of commerce (e. g., forts and troops in the case
of the East India Company), the reasonableness
of collecting the cost from the protected inter-
est. The reasonableness alleged seems to rest on
a plain quid pro quo basis. Third, the justice of
levying customs duties and the like for defraying
the cost of defending trade in general. This
justice also rests at last upon the qttid pro quo
basis. Fourth, the inexpediency of intrusting the
collection of costs of such defense to private
companies (East India, Turkish, etc.). The
evidence supporting this count includes nearly
every type of economic injustice. Fifth, the
economic incompetence of joint stock companies.^^
Sixth, the expediency of making the service carry
the cost, as by fees from pupils (in the case of
schools). This count is, in our view, the same
as the first. It introduces, however, the irrele-
vant question :

Have private or local endowments contributed in
general to promote the end of their institution? Have
they contributed to encourage the diligence, and to im-
prove the abilities of the teachers? Have they directed the
course of education towards objects more useful, both
to the individual and to the public, than those to which it
would naturally have gone of its own accord."

"II, pp. 262 ff. "II, p. 281.

2i8 ADAM SMITH AND MODERN SOCIOLOGY

Then follows an extended discussion of
administrative policies in educational institutions.
The whole argument suggests General Walker's
easy transition from pure economics to public
policy on complex questions, without critical
examination of other factors of the problem
except the economic. The discussion is an uncon-
scious illustration of the impossibilty of abiding
by the economic abstraction when dealing with
anything beyond the purely technical phases of
production. The passage is at the same time an
instance, so serious that it is humorous, of the
characteristic sciolism of the classical economists
in assuming competence to make their economic
generalizations the sufficient basis for authorita-
tive discourse upon matters and things in general.
Here is a disquisition on the virtues and vices
of pedagogy, from the Greeks to the Georges,
smuggled into a treatise on public finance !^^

It should be said, in partial extenuation, that
in this portion of his work Smith seems fo have
felt at liberty to wander from his theme. He
really inserts a series of encyclopaedia articles
rather loosely connected with the specific theo-
rems which the bare analysis of his argument
called upon him to support. These homiletical
gratuities contain much wisdom, but they are as

" II, pp. 281-308. Cf. reference to Bagehot, above, p. T2.

ECONOMIC TECHNOLOGY AND SOCIOLOGY 219

out of place as a silk hat with a sack coat. These
disquisitions do not belong with a discussion of
the problems of public revenue, unless the whole
subject of public revenue is organized into a
much wider philosophy of society than Smith
has outlined in The Wealth of Nations. All he
needs for the immediate uses of his main inquiry
is a list of the actual purposes for which the
British type of society must provide. In such an
excursus as the one just noted he does not go
far enough to get at the roots of the question:
Should society provide at all for such an object?
He merely goes far enough to make his real
argument carry a needless burden of luggage.

The same comments are in point in connection
with the next subject, "Of the Expence of the
Institutions for the Instruction of People of
All Ages." The substance of the section may be
inferred from the opening sentence: ^'The insti-
tutions for the instruction of people of all ages
are chiefly those for religious instruction.'' Then
follows an abbreviated history and critique of
ecclesiastical institutions.^^ It is grotesquely out
of proportion, in whatever light it is considered.
For the reason alluded to in the case of schools,
it is uncalled for as a preliminary to discussion
of British revenues. As a treatise on the struc-

^« II, pp. 309-39.

220 ADAM SMITH AND MODERN SOCIOLOGY

ture and functions of ecclesiastical institutions as
tributary to civilization in general, it opens up all
the unsettled questions of sociology. A founda-
tion of general sociology would have to be
installed before opinions on such complex sub-
jects could have a scientific basis. As in the
section on educational institutions, this inquiry
into the administration of ecclesiastical institu-
tions is full of partially generalized and
partially co-ordinated wisdom. The closing
paragraph is characteristic :

The proper performance of every service seems to re-
quire that its pay or recompense should be, as exactly as
possible, proportioned to the nature of the service. If
any service is very much underpaid, it is very apt to
suffer by the meanness and incapacity of the greater part
of those who are employed in it. If it is very much over-
paid, it is apt to suffer, perhaps, still more by their negli-
gence and idleness. A man of a large revenue, whatever
may be his profession, thinks he ought to live like other
men of large revenues ; and to spend a great part of his
time in festivity, in vanity, and in dissipation. But in a
clergyman, this train of life not only consumes the time
which ought to be employed in the duties of his function,
but in the eyes of the common people destroys almost en-
tirely that sanctity of character which can alone enable
him to perform those duties with proper weight and au-
thority."

Part IV in Chapter I of Book V was referred

" 11, p. 339.

ECONOMIC TECHNOLOGY AND SOCIOLOGY 221

to above in evidence of the shifting senses in
which Smith uses the term "sovereign." The
title of the section is, "Of the Expence of Sup-
porting the Dignity of the Sovereign." Here it
is plain that the "sovereign" is not the state, nor
the people, but the monarch. The plain proposi-
tion which is in the line of the prospectus of
Book V is merely that the public revenues must
provide for the support of the chief magistrate.
Smith incontinently restricts himself to a skimpy
half-page on this subject, when by parity of rea-
soning it might fairly have consumed at least a
score of pages. Then, as though under conviction
of sin for his errors of commission in the one-
hundred-and-thirty-four-page-long chapter, he
recapitulates all that is really pertinent in it in
less than two pages. Still further abbreviated,
it amounts to this :

The expence of defending the society, and that of sup-
porting the dignity of the chief magistrate, are both laid
out for the general benefit of the whole society. It is
reasonable, therefore, that they should be defrayed by the
general contribution of the whole society, all the different
members contributing, as nearly as possible, in proportion
to their respective abilities. Other items of national ex-
pence are not so obviously for the benefit of the common-
wealth as a whole. The burden of these items may,
therefore, reasonably be borne in part by *he particular
persons who cause the expence, or get the initial benefit

222 ADAM SMITH AND MODERN SOCIOLOGY

of it Such items are the administration of justice, local
or provisional outlays, turnpikes, educational or ecclesi-
astical institutions, etc. The general revenue of the
society, over and above defraying the expence of defend-
ing the society, and of supporting the dignity of the chief
magistrate, must make up for the deficiency of many par-
ticular branches of revenue."

Recurring to a point mentioned above, the
reader will probably have noticed that the sched-
ule of reasons for appropriating public expenses
between the commonwealth and certain more in-
terested or responsible members of the state,
hardly bore the evidence of completeness. One
need not be an expert in higher criticism to be
tolerably confident in the opinion that Smith was
not thoroughly clear in his own mind as to what
he was trying to do in the chapter. It contains a
number of incoherent ventures in general social
philosophy. Among them the least successful
was the excursion into administrative philos-
ophy, in which he attempted to outline a scheme
of apportioning civic expenses. His program
stimulates the expectation that he will try to
probe the subject thoroughly. He disappoints
this hope ignominiously. His treatment of the
subject is altogether sophomoric. With the excep-
tion of the six reasons scheduled above, he

"11, p. 341.

ECONOMIC TECHNOLOGY AND SOCIOLOGY 223

avoids the problem altogether, and has recourse
to the diversions in general social philosophy
which we have reviewed.

But is it not finical, and even self-contra-
dictory, to begin with laudation of Adam Smith
for casting his whole conception of life within a
framework of general moral philosophy, and
to end by reproaching him for applying his
economic technology to concrete moral situations ?
Yes; if that were what is meant by the foregoing
criticisms, they would be both inconsistent and
petulant. That is not what is meant. The criti-
cism just passed is not an objection to the appli-
cation of economic technique to decisions about
complex questions of public policy. The objec-
tion is to confusion of the technical economic
factors in questions of policy with other factors;
and especially to premature waiving of the neces-
sary social analysis, and substitution of miscel-
laneous generalization for analysis of the social
factors to the limit. The question, for example,
of the type of educational or religious establish-
ments most conducive to the welfare of a nation
is an altogether broader question than can prop-
erly be discussed on the mere basis of a theory
of public finance. Each of these questions pre-
supposes preliminaries which involve the whole
scope of sociological theory. The problems of

224 ADAM SMITH AND MODERN SOCIOLOGY

public revenue are factors in such a theory, but
they are only factors. They are not the compre-
hensive theory itself. Logically, therefore, there
is no more justification for interpolating the pas-
sages to which objection has been taken in a
treatise on national revenue than there would be
for smuggling them into a treatise on military
and naval strategy, or for an excursus on the latter
subjects in the discussion of the main question
of public support of the military system. We
maintain armies and navies partly to defend
schools and churches, just as we maintain
national revenue systems to furnish schools and
churches with supplies. Questions of academic
and ecclesiastical administration, however, are
thrust altogether out of proportion and perspec-
tive, if they are made corollaries either of fiscal
or of military theory.

Chapter II of Book V returns to distinctly
technological method. It is, however, primarily
descriptive rather than constructive. Its subject
is : "The Sources of the General or Public Rev-
enue of the Society." The substance of Part I
of the chapter may be compressed into these
propositions :

The revenue which must defray, not only the expences
of defending the society and of supporting the dignity
of the chief magistrate, but all the other necessary ex-

ECONOMIC TECHNOLOGY AND SOCIOLOGY 225

pences of government, for which the constitution of the
State has not provided any particular revenue, may be
drawn either, first, from some fund which peculiarly be-
longs to the sovereign or commonwealth, and which is
independent of the revenue of the people; or, secondly,
from the revenue of the people.

The funds or sources of revenue which may peculiarly
belong to the sovereign or commonwealth must consist,
either in stock, or in land. The sovereign, like any other
owner of stock, may derive a revenue from it, either by
employing it himself, or by lending it. His revenue is in
the one case profit, in the other interest."

Public stock and public lands, therefore, the two
sources of revenue which may peculiarly belong to the
sovereign or comomnwealth, being both improper and in-
sufficient funds for defraying the necessary expence of
any great and civilized state; it remains that this expence
must, the greater part of it, be defrayed by taxes of one
kind or another; the people contributing a part of their
own private revenue in order to make up a public revenue
to the sovereign or commonwealth."

Throughout Book V, and notably in Part II
of Chapter II, it gradually becomes plain that the
whole basis of discussion has shifted from the
purely economic, and has become the economic
plus. Is that plus merely administrative expedi-
ency? Is the criterion of judgment which Smith
applies merely a composite of economic and civic
utility? Is the standard remotely and vaguely in

" II, p. 342.
"II, pp. 350, 351.

226 ADAM SMITH AND MODERN SOCIOLOGY

view economic and civic, with a further unformu-
lated plus which is more intimately human?

I am inclined to think the third alternative is
nearest the truth. It is certain that Smith does
not pass judgment upon revenue devices solely for
their bearing upon the production of national
wealth. That is, the strictly and exclusively eco-
nomic criterion with which the treatise started has
been consciously or unconsciously retired, and a
multiple criterion has taken its place. It is evident,
too, that questions of administrative convenience
are permitted now to turn the scale for or against
possible programs. These are brought into a
sphere of civic economy which overlies the
sphere of productive economy, and sometimes
vetoes maxims of conduct which productive
economy alone would enforce.^^ There also

" The Wealth of Nations enthalt eine Oekonomik und eine
Politik, und es gehort zu den auffallendsten Thatsachen der
Geistesgeschichte, dass man diesen letzteren Umstand bisher
so gut wie ganz iibersehen oder besser ignorirt hat" (Oncken,
Smith und Kant, p. 14).

In the next paragraph Oncken continues : "Zwar umfasst
die Smith'sche Staatslehre nur das letzte der fiinf Biicher, aus
welchen das ganze Werk besteht, aber dieses Buch fiillt nahezu
den dritten Theil des Wealth of Nations aus und enthalt eine
ausfiihrliche Darlegung und Beurtheilung einerseits der Staats-
zwecke in ihren einzelnen Richtungen und andererseits der

Staatsmittel Wir haben es dabei mit einer abge-

rundeten Staatslehre zu thun, die nach eigenen von der Volks-

ECONOMIC TECHNOLOGY AND SOCIOLOGY 227

hovers on the horizon a range of relations which
are neither definitely economic nor civic. They
have certain imperatives of their own which
vaguely interpose themselves in estoppal of purely
economic or civic programs, although they do not
come out fairly into the open and give a distinct
account of themselves. In these latter considera-
tions the more widely moral in Smith's concep-

wirthschaft unterschiedenen Gesichtspunkten gegliedert ist und
eine Hohe des Standpunktes einnimmt, wie sie in manchen
Dingen noch kaum von der Gegenwart (1877) eingeholt wor-
den ist, ein Umstand, der vielleicht gerade die Schuld tragt,
dass die Theorie bisher keine grossere Beachtung gefunden
hat." Oncken seems to me to have judged Book V more favor-
ably than it deserves. Smith had simply not thought through
the distinctions that separate the problems of economics from
those of civics ; or, if he had, he did not organize his material
accordingly. The fact that nearly one-half of the Lectures
on Justice, etc., was virtually a preliminary sketch of The
Wealth of Nations might perhaps have been cited by Oncken,
if the book had appeared before he wrote, in support of his
interpretation. It is, however, on the whole, in my judgment,
evidence in favor of my view.

I am not so much inclined to take issue with Oncken's
astute suggestion that the title of Smith's work should properly
have been : "An Inquiry into the Nature and Causes of the
Wealth and Power of Nations." This suggestion is prompted
by Smith's definition of political economy. Book II, Chapter V :
"The great object of the political economy of every country
is to increase the ' riches and power of that country."
Granted that the inference is valid, my contention, that analy-
sis of the problems was only in embryo in Smith's thought,
and in the plan of the treatise, is all the stronger.

228 ADAM SMITH AND MODERN SOCIOLOGY

tions is vaguely asserting itself, but the fact of
the assertion and its implications are too indefinite
to make a decisive impression. We have a case
of a more particular abstraction feeling its way
toward correlation with a more general reality.
Meanwhile the resultant is a predominant tend-
ency to express the reality in terms of the
abstraction rather than the reverse. This tend-
ency held the balance of power, and still holds it,
but there are credible signs that the balance of
power is rapidly passing from the party of
abstraction to the party of reality.

It is impossible to decide how much of Book
V, Part II, Chapter II, is an exemplification of
each of the tendencies above indicated. They
are traceable in it in uncentered confusion. The
fact is that we have in this chapter, not science
of any sort, in the strict sense, but merely that
more or less organized description of phenomena
which is the necessary preliminary of science.
The generalizations have the value of more or
less probable hypotheses, and they foreshadow
the differentiation of the various divisions of
social science which shall be competent to test all
the terms of the hypotheses.

Part II of Chapter II treats of taxes. As was
intimated above, it is not to be regarded as the
outline of a theory of taxation, whether the

ECONOMIC TECHNOLOGY AND SOCIOLOGY 229

author intended it for that or not. It turns out
to be, in effect, principally a preliminary essay
giving an account of different forms of taxation.
The animus of the chapter may be gathered from
the opening paragraph:

The private revenue of individuals, .... arises ulti-
mately from three different sources : Rent, Profit, and
Wages. Every tax must finally be paid from some one
or other of those three sorts of revenue, or from all of
them indifferently. I shall endeavour to give the best
account I can, first, of those taxes which, it is intended,^'
should fall upon rent; secondly, of those which, it is in-
tended, should fall upon profit; thirdly, of those which,
it is intended, should fall upon wages; and, fourthly, of
those which, it is intended, should fall indifferently upon
all those three different sources of private revenue. The
particular consideration of each of these four different
sorts of taxes will divide the second part of the present
chapter into four articles, three of which will require
several other subdivisions. Many of those taxes, it will
appear from the following review, are not finally paid
from the fund, or source of revenue, upon which it was
intended they should fall.^

In spite of the qualification just made, the
chapter lays down four "maxims with regard to
taxes in general." They corroborate what was
said above about the extension of Smith's vision
beyond the orbit of his precise analysis. Although

^" I have italicized this phrase because it must be com-
mented on presently.
="11, p. 351.

230 ADAM SMITH AND MODERN SOCIOLOGY

they are not supported, so far as his own work
goes, by a critical examination of the whole
sociology of taxation, they have exerted a last-
ing influence upon the development of doctrines
of taxation. They are as follows :
V I. The subjects of every state ought [«#jtf^ to contribute
toward the support of the government, as nearly as pos-
sible, in proportion to their respective abilities ; that is, in
proportion to the revenue which they respectively enjoy
under the protection of the state.

II. The tax which eadi individual is bound to pay
ought [#f*J to be certain and not afbitrary. The time
of payment, the manner of payment, the quantity to be
paid, ought t^iH all to be clear and plain to the con-
tributor and to every other person.

III. Every tax ought l^sie^ to be levied at the time, or
in the manner in which it is most likely to be convenient for
the contributor to pay it.

IV. Every tax ought t*fe»] to be so contrived as both
to take out and to keep out of the pockets of the people
as little as possible, over and above what it brings into the
public treasury of the state." •

Whence these "oughts"? In no strict sense
can the word "ought" belong in the economic
vocabulary. It is a term of moral, not of economic,
technology. At the same time, taxation is in

** II, pp. 351-53. Oncken (Smith und Kant, pp. 247-50)
attempts to show that these four rules are substantially in
Montesquieu, Esprit des his. Lib. XIII. In the same connec-
tion (p. 246) Oncken remarks : "Diese vier Regeln sind seit-
dem in alien Werken der Finanzwissenschaft als fundamentale

ECONOMIC TECHNOLOGY AND SOCIOLOGY 231

no strict sense simply an economic process. It
is a function of the total life of the people.
"Ought" art, science, religion, to be taxed? If
so, why? If not, why not? These are questions
of the most inclusive social philosophy. It is
impudent for economics alone to presume to
answer them. It is highly improbable that Smith
supposed his **oughts" got their force from his
economics alone. He was more or less con-
sciously and deliberately mobilizing in them his
whole moral philosophy. He virtually asserted
in them: "All that I know about social rela-
tions in general combines to declare that these
things ought to be in a righteous system of
taxation." Here, then, is another occasion for
reiterating one of my principal theses about the
relation of Adam Smith to later social theory.
He realized in the beginning, and after his epoch-
making concentration for a time upon pure
economic theory he came back of necessity to
practical profession, that human conduct is a
plexus of moral relations. The implications of

Gesichtspunkte aufgefuhrt worden, aber sie sind in der selben
unentwickelten Gestalt geblieben wie bei Smith selbst. Sie
stehen ganz isolirt fur sich da und sind so auch weiter gefiihrt
worden, merkwiirdigerweise als das Einzige was von der
Smith'schen Finanzlehre iiberhaupt eine nachtragliche Beach-
tung gefunden hat." Perhaps I have sufficiently hinted below
why the last fact noted is not at all surprising.

232 ADAM SMITH AND MODERN SOCIOLOGY

all these relations, not merely of an abstract
series of them, must be found out, in order to
establish a working theory of conduct. Economic
theory did not at once take its cue from this
broad conception. It overemphasized the value
of economic theory by underestimating the value
of the other sets of relationships in society. This
arrested development occupied nearly a century,
before the moral argument latent in Adam
Smith's philosophy began to make its impression
in the methods of the sociologists. Smith him-
self seems to have reached the limits of his
impulse to work out a concrete moral philosophy
in a description of different schemes of taxation,
"with some incidental judgments about the better
or worse workings of the plans. It might be
charged that Smith actually attempted something
more constructive than this. It is quite possible
to interpret the rest of the discussion of taxes as
a thoroughly doctrinaire attempt to justify a
definite program of taxation. There is plenty
of evidence that the descriptive and historical
form was merely a thin veil for a firm dogmatic
substance. I prefer to give him the benefit of
the doubt, especially as, in either case, his type
of work was in effect merely a display of the
need of more critical and differentiated science.
In his standards of judgment various types of

ECONOMIC TECHNOLOGY AND SOCIOLOGY 233

criteria were evidently combined. He introduces
his sketch of taxation systems in the following
paragraph : ^^

The evident justice and utility of the foregoing max-
ims ^"^ have recommended them more or less to the atten-
tion of all nations. All nations have endeavoured to the
best of their judgment, to render their taxes as equal as
they could contrive; as certain, as convenient to the con-
tributor both in the time and in the mode of payment, and
in proportion to the revenue which they brought to the
prince, as little burdensome to the people. The following
short review [sic] of some of the principal taxes which
h^'ave taken place in different ages and countries will show,
that the endeavours of all nations have not in this respect
been equally successful.

All the general criticisms which have been^
passed on Book V, Chapter II, apply with equal
pertinence to Chapter III, the last in the book,
"Of Public Debts." It is mainly a continuance
of the subject of public revenues. It is primarily
descriptive rather than systematic. It does not
clearly discriminate between economic and moral
effects. It does not stick to the subject. It
includes a passage on debasement of the coinage.
It returns to the subject of taxation, and even to
the methods of exploiting the colonies. It dis-
cusses the use of paper money, and it raises the
Irish question.

^11, p. 354.

^* L e., morals on the one hand, and economics on the other.

VIII

CONCLUSION

If logic and a deliberate methodology ruled
the world, or even the supposedly intellectual
part of it, Adam Smith would have been as
immediately, if not as intensely, influential upon
concrete moral philosophy, or sociology, as he
was upon economics. There is a good deal of
plausibility in the Marxian version of the reasons
why logic did not have its perfect work in the
social theories of the century following the
publication of The Wealth of Nations. The
Marxian explanation, however, falls very far
short of the whole psychology of the events.
The fact remains that Smith set a new standard
of inquiry into the economic section of the condi-
tions of life, while life presented itself to him
as, on the whole, a moral affair, in which the
economic process is logically a detail. The
further fact remains that all the consistencies of
logic enjoined analysis of the whole process
which human experience composes, so that knowl-
edge of all the antecedent conditions and con-
stituent processes of life might become as positive
as the knowledge of economic technology which
235

236 ADAM SMITH AND MODERN SOCIOLOGY

Smith set a new pace in acquiring. The third fact
remains that a suspensive veto, analyze it how we
will, held that wider moral science pretty effectu-
ally in check for a century. It was in embryo in
Adam Smith's moral philosophy. The need of it
was encountered in his doctrinizings abou^ social
relations which were more than economic.
Men's interests in these wider social relations
were too weak effectively to divert attention from
all that immediately pertained to wealth. This
diagnosis applies throughout the century follow-
ing Adam Smith. Men so focalized the wealth
interests that all other interests became relatively
invisible.

If rhetoric which confessedly recalls the flick-
ering fame of the late Mr. Joseph Cook may be .
employed to express the situation, the social
sciences were still a metaphysical Bastille which
could be destroyed only from within. Mental
revolt had pierced a few observation-slots through
the inner walls of the prison, and had sapped and
mined parts of the outer inclosure. Although
we can now see that the structure founded on the
Thomasian theology was crumbling, it still
effectually immured knowledge. The series of
assaults, beginning with Descartes, continued in
the line of Locke and Hume in England, of
Wolff and Kant in Germany, had widened the

CONCLUSION 237

putlook breaches, to be sure, but had also par-
tially filled them with intellectual debris. Psy-
chology was still more speculative than positive.
Ethics was metaphysical rather than inductive.
Sociology, so far as it had been extemporized
byv the struggle for liberty, was uncentered and
individualistic, with only a faint premonition of
the social reality. Not until physical science and
psychology and ethics became fully self-conscious
could they together develop force enough com-
pletely to raze the dogmatic dungeon, and to
found in its place a free republic of moral
philosophy.

Dropping the figure, we may say literally that
it was too much of a task for the interpreters of
human experience to develop at once the full
logical implications of the progressive principles
imbedded in Adam Smith's system. The recon-
struction on the physical side that is symbolized
by the name of Darwin was an indispensable aid.
Psychological analysis, taking a new start with
Hegel's Phdnomenenologie des Geistes, had to
establish intellectual self-confidence and to supply
a critical technique. Not least important, per-
haps, the little group of Benthamites, even more
ignorantly feared and more arrogantly misrepre-
sented as utilitarians than as economists, were
needed to break the monopoly of the superstitions

238 ADAM SMITH AND MODERN SOCIOLOGY

which were estopping real investigation of the
origin and standards of our moral valuations.
After the way had been prepared, and the critical
apparatus had been invented for that program of
ethical judgment which I have called telicism,^
the line of march could once more be resumed.
The fulness of the times had come for co-ordina-
tion of the most matter-of-fact economic tech-
nology with a thoroughly objective sociology,
within the horizon of a valid moral philosophy.
We are entering a period in which judgment of
social relations is to operate in full vision of this
larger and truer perspective.

It is therefore not fanciful to repeat in sub-
stance the proposition with which this inquiry
began, viz. : Modern sociology is virtually an
attempt to take up the larger program of social
analysis and interpretation which was implicit
in Adam Smith's moral philosophy, but which
was suppressed for a century by prevailing inter-
est in the technique of the production of wealth.

^ General Sociology, pp. 669-84, et passim.

INDEX

A

Agricultural systems of political economy, Smith's views

of, 202 ff.
Analysis vs. synthesis, v

Anderson, J. P., bibliography of A. Smith, 34, 65
Approbation, place of, in Smith's theory, 46, 50, 82
Argument of this book, 21, 24, 66, 'JT, 155 ff., 196 ff., 238
Arts and Science, Congress of, v, 64

B

Bacon, Lord, 28

Bagehot, W., on The Wealth of Nations, 61, 67, 68, 70 ff.,

77, loi, 103, 104, 183
Bax, E. B., edition of The Wealth of Nations, 65
Bellamy, E., 86
Bentham, J., 204, 237
Bohm-Bawerk, E. von, 141, 159
Boisguillebert, P. L. P. de, 195
Bonar, J., 29
Burke, E., 26
Butler, W. A., 27

C

Cannan, E., edition of Smith's lectures, 26, 59, 204

Cantillon, R., 195

Cook, J., 236

Capital, economics and sociology of, 155-80

Capital, ways of employing; Smith's classification, 176 ff.

Capitalism, genius of, 2

Capitalists, Smith's suspicions of, 153, 154

239

240 ADAM SMITH AND MODERN SOCIOLOGY

Capitalists, social justification of, 129

Capitalization or consumption. Smith's doctrine of, 168 ff.

Capital vs. labor, economic not social antithesis at Smith's
time, 100, 128

Classical economics, 4, 10, 16, 23, 24, 67 ff., 147 ; assumption
of paramount worth of wealth, 148, 199; defection of,
from Smith's moral standards, 139, 148; statical
presumptions of, 138, 200 ff. ; vs. democracy, 145 ff,,
215; vs. socialism, 131, 143 ff.; vs. social philosophy,
148

Communist manifesto, no

Congress of arts and science, v

Consumption vs. capitalization. Smith's doctrine of, 168 ff.

Consumption vs. production, 3, 79

Cossa, L., 28, 64

Customary price vs. "natural" price, 122 ff.

Customary vs. natural rights, 123 ff.

D

Darwin, C, 57, 237

Debts, public, Smith's views on, 233

Democracy vs. classical economics, 145 ff, ; vs. privilege,

principle at issue between, 123 ff, ; vs. property, 153
Descartes, 28, 40, 236
Distribution, social problem of, 166
Dividends, Smith's denial that they are reward of labor,

118, 150
Division of labor, effects of, 85 ff.
Dyer, L., 64

E

Economic history, methodological relations of, 17-19
Economics, literature of, 64

INDEX 241

Economics and sociology, vi, vii, 3, 8, 10, 14, 23, 64, 65, 'j'j,
144 f., 146, 156, 196 ff., 209 ff., 218 ff., 223, 232, 235 ff.

Economic theory, necessary reconstruction of, 179, 180

Economic vs. sociological interpretation of history, 181-87

Economists, early; humane purpose of, vi

Economists, have they regarded themselves as compe-
tent guides of conduct, 72

Entail, historic reasons for, 185

Epictetus, 39

Equality of endowments. Smith's theory of, 93

Finance, national, methodological relations of, 20
Finance, Smith's doctrines of, 28
Fisher, I., 160

G
George, H., 143

German vs. English economics, 10
Germany, policy of, with respect to "unearned increment,

151
Gournay, J. C. V. de, 195
Grotius, H., 28

H

Haldane, R. B., 34, 53, 65

Hamilton's edition of D. Stewart's works, 25

Hartley, D., 27

Hasbach, W., 5, 27, 28, 29

Hegel, G. W. F., 113, 237

Hirst, F. W., Life of A. Smith, 26, 35, 39, 61, 62

Hobbs, T., 28, 104

Hume, D., 27, 28, 34, zj, 236

Hutcheson, F., 2^^ 28

242 ADAM SMITH AND MODERN SOCIOLOGY

I

Impartial observer, Smith's theory of, 39, 63
Inequality, Smith's theory of social responsibility for, 93
Ingram, J. K., 47, 64
Interest, Smith's justification for, 176

J

James, E. J., 64

Justi, J. H. G. von, 28

Justice, means of defraying costs, 212 ff.

Justice, Smith's theory of, 54, 55, 59

K
Kant, I., 29, 211, 236
Kidd, B, 86

L
Labor as norm of value, Smith's views of, 104 ff., 127, 140,

149 ff., 203
Labor as title to income. Smith's views, 174 ff.
Labor, economics and sociology of, 79-154, 203
Labor vs. capital, economic not social antithesis at Smith's

time, 100, 128
Laborers, Smith's vi'ews about their defective attention to

their own interests, 150, 153, 154
Laissez-faire doctrine, fallacy of, 186 ff. ; meaning of,

154, 186, 187, 191 ff. ; Smith's relation to, 215
Landlords, social justification of, 129, 150
Le Play, 76
Leslie, T. E. C, 11, 181
Li Hung Chang, 94
Locke, J., 236

M
Mallock, W. H., 86
Malthus, T. R., vii, 18, 134

INDEX 243

Manchester School, 32

Marginal theory, 102

Market vs. natural price, Smith's theory of, 121 flF.

Marx, K., 98, 99, 100, 107, iia-13, 116, 126, 128, 130, 131,

132, 137, 146, 235
McCullock, J. R, 198

Mercantilists, Smith's views of, 189 ff., 201 ff.
Mill, J. S., vii, Ti, 12, 21, 55, 56, 69, ^2, 98, 139, 17I' 182
Millar, J,, 32
Miller, A. C, 64

Money, Smith's theory of, 95 ff., 193 ff.
Montesquieu, C, 28, ZZ, 230

Moral judgments, Smith's theory of sources, 46
Moral philosophy, non-social in eighteenth century, 48
Moral philosophy, relation to the social sciences, viii, 3,

4, 8, II, 15, 20, 22
Morals, problem of, 56
Mun, T., 192

N
Natural vs. customary rights, 123 ff.
Natural vs. market price, Smith's theory of, 121 ff.
Neurath, W., 62

O

Oncken, A., 5, 29, 60, 226, 230

P

Parsimony, Smith's theory of, 172 ff.

Persons, the central concept in social science, 4

Physiocrats, Smith's relation to, 14, 28, 195

Plato, 206

Political economy. Smith's dictum of object, 227

Price, Smith's theory of, 97 ff., 116 ff.

244 ADAM SMITH AND MODERN SOCIOLOGY

Privilege vs. democracy, principle at issue between, 123 ff.
Problems of economics and sociology, 189-208
Process, social, 156
Production vs. consumption, 3, 79

Profits, antithetic assumptions of capitalism and social-
ism, 113 ff-; need of conclusive theory of, 114; Smith's
theory of, 134 ff., i57^-l vagueness of the concept in
Smith's theory, iii
Propensity to barter, Smith's theory of, 90
Property rights, failure of economists to analyze, 132
Property, sociological view of, 137; vs. democracy, 153
Propriety, meaning of, in Smith's theory, 38
Psychology, speculative character of, at Smith's time, 237
Public works, means of sustaining, 214 ff.
Pufendorf, S. von, 28

Q

Quesnay, F., 195

R
Rae, J., Life of Adam Smith, 26
Raphael, school of Athens, 157
Rectitude, synonymous with "propriety" in Smith's theory,

38
Religious institutions, means of supporting, 219
Rent, Smith's theory of, 116 ff., 142 ff. ; social problem of,

144 ff.
Revenue, public, sources of, 224 ff.
Ricardo, D., vii, 72, 131, 142, 143
Roscher, W., 28
Ruskin, J., on economists, 61 ff.

S
Schiller, J. C. F. von, 63
Senior, N. W., 172

J

INDEX 245

Service, the social basis for rights, 132

Shaftesbury, A. A. Cooper, third earl of, 2"]

Simmel, G., 103

Skarzynski, W., 60

Small, A. W., General Sociology, 238

Smith, A., vi, vii, viii, ix, 2, 4, 5, 6, 10, 77, 81, 155 ; analysis
of his philosophy, 9, 32 ff,, 65, 66; as object-lesson in
sociological methodology, 65 ; Bagehot's criticism of,
67 ff. ; biographies of, 25 ff. ; concept "natural," 14 ;
dictum that coi'porations cannot become economically
efficient, 217; foolish prophecy about America, 178,
179; Ingram's estimate of, 47; labor theory of, 6, 203;
jec tures on jurispruden ce^ 59, 84, 204 ff., 227 ; loose-
ness of his argument in latter portion of The Wealth
of Nations, 208 ff., 216 ff., 218 ff., 222, 225, 233 ; main
question in The Wealth of Nations, 8; methodology
of, 20, 28, 29, 181 ff. ; moral philosophy of, s^ ff-, 40 ff.,
45, 48, 52 ff., 57-5$v6i ff., 81, 148, 197, 230 ff.; relation
to individualism,gi) relation to laissez-faire doctrine,
Q4^/2iSi relation to^netaphysics, 34; relation to
modern economists, if i79~^iT. ; relation to psychology,
48, 51; relation to socialism, 7, 65, 98 ff., 108 ff.; rela-
tion to sociology, 167, 230 ff. ; relation to utilitarians,
34, 51, 204 ff.; sources of information about, 25-77;
static preconceptions of, 56, 107 ff., 125 ff., 148, 149, 160;
theory of capital, 15; theory of consumption, 6; theory
of ethics, Lis ff. ; theory of justice, 54, 55; theory of
moral sentiments, 26, ;is, 35, 40 ff., 46, 49, 59, 60, 70, 71 ;
theory of taxation, 228 ff.; views of object of political
economy, 227

Socialism, a reaction from eighteenth-century political
philosophy, 207; not pre-eminently social, 126; vs.
classical economics, 131, 143 ff.

246 ADAM SMITH AND MODERN SOCIOLOGY

Socialists of the chair, Oncken's confusing of Smith with,

30
Social variants of economic forces, 135 ff., 184 ff., 191 ff.
Sociological vs. economic interpretation of historj^ 181-87
Sociologists, true successors of Adam Smith, 4
Sociology and economics, vi, vii, 3, 8, 10, 14, 23, 64, 65, ^T,

144 fif., 146, 156, 196 ff., 209 ff., 218 ff., 223, 232, 235 ff.
Sociology, vagueness of, at Smith's time, 22)^
Sombart, W., i, 92
Sovereign, means of supporting, 221
Sovereign, Smith's use of the concept, 209 ff.
Sovereignty, Smith's use of the concept, 204 ff.
Spencer, H., 57, ^, 152, 212, 215
Stein, H. F. K., 28
Stewart, J., 29

Sympathy, place of, in Smith's theory, 38 ff., 46-48
Synthesis vs. analysis, v

T

Tarde, G., 86

Taxes, Smith's doctrines of, 228 ff.

Telicism, 238

Thomas, W. I., 86

Thomasius, 236

Turgot, A. R. J., 26

U

Umpfenbach, K., 28

Utilitarianism, Smith's affinity with, 204 ff.

V

Value, theory of, 55, 56, 96 ff.
Von Mohl, R., 189, 210

INDEX 247

W

Wage-fund theory, 133

Wagner, A., 28, 31

Walker, R, 218

War, methods of defraying costs, 210 ff.

Wealth, a fragmentary concept, 156, 199

Wealth as a social factor. Smith's views of, 104

Wealth of Nations, viii; an inquiry in sociology, i, 3, 4,
8, II ff., 59, 60, 63, 66, 77; epitome of, 84 ff.; primarily
a technological treatise, 66, 79, 84, 90, 95, 120, 135,
167

Webb, S., 86

Wolff, C, 28, 236

UNIVERSITY OF TORONTO
LIBRARY

Acme Library Card Pocket

Under Pat. "Ref. Index File."
Made by LIBRARY BUREAU